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Business Studies · Oct / Nov 2020 · Paper 22 · Question 1

0450

As printed in the paper

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  • 1(a)[8]

    Explain two reasons why finance is needed by CC. Award 1 mark for each relevant reason (maximum of two): Relevant answers might include:

    For the purchase of investment goods/capital/expansion of existing business (1)

    – e.g. buy equipment/machinery (1)

    – high amount of finance needed so may not all be from owners capital (1)

    To provide working capital/pay expenses/fixed costs/variable costs/ overheads/day-to-day expenses (1)

    – e.g. payment of wages/purchase of raw materials (1)

    – if not able to pay costs then output cannot be produced (1)

    &/or - prevents cash flow problems/lack of liquidity (1)

    Development of new product (1)

    – high cost of producing prototypes/cost of market research for new product (1)

    – outflow of cash with no inflow for a certain time (1)

    Start up a new business (1)

    – needs to purchase equipment/raw materials (1)

    owner may lack sufficient capital (1)

    &/or – may take time for sufficient cash to be built up in the business to pay for assets (1)

    Award a maximum of 3 additional marks for each explanation of the reason – one of which must be applied to this context. For example: CC needed money when it started up (1)

    and each partner invested $10 000 (app). This finance paid for training new employees, so they are effective at work (1)

    and for equipment to help the workers be efficient (1). Application could include: mobile phone covers;

    $10 000 invested by each partner;

    bank loan of $10 000;

    leased a factory;

    brother;

    two partners.

  • 1(b)[12]

    Explain the benefits and limitations of the following two ways of achieving quality production. Which way should CC use? Justify your answer.

    Quality control
    Quality assurance Level Description Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of both methods. Well-justified recommendation. Candidates discussing both methods in detail, in context and with well-justified recommendation, including why the alternative method was rejected, should be rewarded with the top marks in the band. 9–12 Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of at least one method. Judgement with some justification/some evaluation of choice made. Candidates discussing at least one method in detail and applying it to the case should be rewarded with the top marks in the band. 5–8 Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss the methods with little/no explanation. Simple judgement with limited justification/limited evaluation of choice made. Candidates outlining both methods in context should be rewarded with the top marks in the band. 1–4 No creditable response. Relevant points might include: Advantages Disadvantages Quality control
    Products checked at the end of the production line tries to eliminate faults and errors before the customer receives the mobile phone cover
    Less training is required for the 10 workers as inspectors check the quality of the covers before they leave the factory
    It raises costs as inspectors need to be employed
    Identifies faulty products at the end of the process but does not identify where the fault has occurred
    If do not identify the fault, then it does not eliminate the faulty process
    High costs if phone covers need to be scrapped Quality assurance
    Products checked at every stage of the production process to try to eliminate faults or errors at each stage of production before passing to the next stage reducing faults at the end
    Therefore there are fewer customer complaints of faulty phone covers
    Reduced costs if fewer mobile covers are scrapped
    Can make workers feel trusted and may improve motivation
    Can be expensive to train employees to check the quality of their own work
    The reliability of employees is important, and they need to be committed or quality assurance will not be effective
    Takes longer to produce phone covers as each worker needs to do their own check for faults Recommendation Justification may include:
    If the process to produce a mobile phone cover is simple, then quality control may be most suitable as inspectors may just carry out a simple check at the end of the production line and the 10 production workers do not need to be trained to check their own work, reducing training costs, which they would have to do if quality assurance was used.
    Quality assurance is best because each stage of production can be checked so it is less likely for a faulty product to go to customers than if quality control is used. It keeps a good brand image for CC products. It will ensure faults do not need to be repaired, reducing costs of faulty products being scrapped. Also cost of employing inspectors is saved, which would have to be paid with quality control.
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