Business Studies · May / June 2021 · Paper 12 · Question 3

0450

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GHT is a public limited company. It produces steel products including gates and garage doors. GHT has a flat organisational structure and a short chain of command. GHT has many stakeholder 3 groups including 600 employees. The Managing Director is considering introducing job rotation to improve employee motivation. He has also been analysing some financial data. An extract is shown in Table 3.1. Table 3.1 Extract of revenue and cost data for one of GHT’s products (product X) 30000 Units sold in 2020 $100 Price per unit $60 Variable costs per unit $900000 Fixed costs 22500 Break even output (units)

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3(a)[2]
Define ‘fixed cost’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Costs that do not change with the level of output/sales [2]
OR Costs that do not vary in the short run with the number of items sold or produced. [2]
Partial definition e.g. costs that do not change [1]
2 Do not accept examples. Do not award also ‘known as overhead costs’ as this does not define the term.
3(b)[2]
Calculate the margin of safety for product X in 2020. Show your working. Award 2 marks for correct answer. Award 1 mark for correct method but incorrect answer. Correct answer: 7500 (units) [2]
Correct method but incorrect answer: e.g. Current output – breakeven output [1]
OR 30 000 – 22 500 [1]
2 Award only 1 mark if 7500 is written as part of the answer but is not given as the final answer. Where candidates present their answer with a $ sign award only 1 mark as this is not a financial value. If correct answer given with no working shown, award 2 marks.
3(c)[4]
Outline two advantages to GHT of having a short chain of command. Award 1 mark for each relevant advantage. Award 1 mark for each relevant reference to this business. Points might include:
Communication is quicker / communication is more accurate / quicker decision-making [k] within the public limited company [app]
Easier to delegate tasks / more delegation [k] to its 600 employees [app]
Workers feel more motivated [k]
Lower costs as fewer managers/supervisors needed [k] Other appropriate responses should also be credited. 4 Note: To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made. The following words are likely to be appropriate for this question:
Steel / gates / garage doors
600 employees
Public limited company
Flat (organisational structure)
Job rotation
Improve employee motivation
22 500 (break-even output)
30 000 (units sold)
$100 (price per unit)
$900 000 (fixed costs)
$60 (variable cost per unit) Other appropriate examples in context can still be credited. Only award points about communication once.
3(d)[6]
Explain one advantage and one disadvantage to GHT of using job rotation to improve employee motivation. Award 1 mark for identification of each relevant advantage/disadvantage (max 2). Award 1 mark for each relevant reference made to this business (max 2). Award 1 mark for each relevant explanation (max 2). Points might include: Advantage:
(As work more varied) fewer workers might leave [k] from its 600 employees [app] leading to lower recruitment costs [an]
Business has a more flexible / skilled workforce / multiskilling [k] leading to higher productivity / higher output [an]
Easier to cover / replace others when someone is absent [k] so may be able to meet an order on time [an]
Can help business identify where employees work best [k] 6 To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made. The following words are likely to be appropriate for this question:
Steel / gates / garage doors
600 employees
Public limited company
22 500 (break-even output)
30 000 (units sold)
$100 (price per unit)
$900 000 (fixed costs)
$60 (variable cost per unit) Other appropriate examples in context can still be credited. Do not award motivate or demotivate employees as stated in the question. Guidance Disadvantage:
Increased training needed [k] increasing costs/expenses [an] so may increase its break-even output above 22 500 [app]
Workers may not be familiar with each task / less specialist in task / not good at all tasks [k] lowering quality / increase waste / leads to mistakes [an] increasing variable cost above $60 [app]
Takes time to learn different tasks / switch between jobs [k] Other appropriate responses should also be credited.
3(e)[6]
Do you think the shareholders are the most important stakeholder group to the success of a limited company? Justify your answer. Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award 2 marks for justified decision as to whether shareholders are the most important stakeholder group to the success of a limited company. Points might include: Shareholders/owners
Provide finance / invest money / capital in business [k] which can help the business expand / buy more equipment [an] so can increase output [an]
Influence the aims of the business [k]
Have the power to vote out the directors [k]
They have little / no influence over day-to-day decisions [k] 6 This is a general question so there are no marks for application. Candidates may focus on other stakeholders, but the evaluation must focus on whether shareholders are the most important stakeholder to the success of a limited company. To gain both evaluation marks, response must clearly relate to a limited company. Guidance Other stakeholders can include:
Customers [k] as they buy the products [an] and if ignores their needs the business will lose sales/revenue [an]
Directors/managers [k] are responsible for day-to-day decision-making [an]
Employees [k] make the products [an] so if they become demotivated quality may fall [an]
Suppliers [k] provide materials/inventory [an]
Local community [k] provide the workers [an]
Government [k] provide the legal framework in which the business operates [an]
Bank [k] provide finance/loans [an] Other appropriate responses should also be credited. Justification might include: Shareholders are important as they invest money in the business [k] which can help the business expand [an]. However, once the business is established, they have little / no influence over day-to-day decisions. Customers [k] matter as they buy the products [an]. While shareholders provide important finance, without customers even a limited company cannot generate income [eval] and without t his cannot cover its costs or make a profit, so the customer is probably the most important stakeholder. [eval]

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