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Business Studies · Oct / Nov 2021 · Paper 22 · Question 4

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  • 4(a)[8]

    Explain four functions of management carried out by Kaari. Award one mark for each function named (maximum of 4 marks). Award a maximum of 1 additional mark for each explanation in context of the function of management that may be carried out by Kaari. Functions might include:

    Planning - setting aims for the business such as sales targets of increasing output of 3 large items of playground equipment per week
    Organising - Kaari organises the tasks for the 3 employees
    Coordinating – the tasks for the job production
    Commanding - Kaari instructs the employees on how to manufacture the new unique product
    Controlling - Kaari controls the employees so that 15 small items of playground equipment for home use is produced each week. For example: Organising (1)

    the employees to manufacture the playground equipment (app) Application could include: wooden playground equipment;

    children’s playgrounds;

    3 large/15 small items of playground equipment;

    high-quality equipment;

    sole trader;

    job production;

    individually designed playground equipment;

    3 skilled workers;

    cost-plus pricing;

    fully tested to meet legal safety standards;

    playground equipment for home use. Question Answer

  • 4(b)[12]

    Using Appendix 2 and other information, consider whether PPE should produce only large items of playground equipment or produce only small items of playground equipment. Justify your answer using suitable calculations. Level Description Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of both options. Well-justified conclusion. Candidates discussing both options in detail, in context and with a well-justified conclusion including why the alternative option 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 option. Judgement with some justification / some evaluation of choices made. Candidates discussing both options in detail and applying them 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 options with little/no explanation. Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining both options in context should be rewarded with the top marks in the band. 1–4 No creditable response. Question Answer Relevant points might include: Produce only large items of playground equipment

    Revenue per week $1000 × 3 = $3000 (L1)
    Cost per week $500 × 3 = $1500 (L1)
    (Gross) profit $3000 – $1500 = $1500 (L2)
    (G)PM = 50% (L2) – Government increased spending on children’s playgrounds – increased demand for PPE equipment – increases PPE sales of large item products
    Government spending $10m improving children’s playgrounds at $5000 each = 2000 playgrounds – this requires a large increase in output for PPE
    (Gross) profit margin on small items of equipment is higher at 75% instead of 50%
    Profit is lower for small items and therefore more profit made if only sold large items
    PPE equipment in playgrounds may increase sales to retailers as well as government spending – as improved reputation
    PPE may have to increase production facilities to meet increased demand
    The Government may spend on competitors’ products – may affect PPE in a negative way if more competitors’ products appear in playgrounds
    May only be a one-off purchase Produce only small items of playground equipment
    Revenue per week $100 × 15 = $1500 (L1)
    Cost per week $25 × 15 = $375 (L1)
    (Gross) profit $1500 – $375 = $1125 (L2)
    (G)PM = 75% (L2)
    Smaller profit than large items but market is growing
    Growing trend from parents to purchase small items of equipment – increased demand in the long term
    Need to make an additional 5 small products each week to match the weekly profit of the large items which may require additional skilled labour Conclusion
    The increases in demand from government will prompt PPE to increase sales of large items of playground equipment. Higher profit for large items of playground equipment. If PPE can expand production, then increased government spending is likely to have the greatest effect on profit even though there may be some increased expenses from the need to borrow for expansion.
    Small items of playground equipment should be chosen as, even though large items have higher profit initially, the demand for small items has an increasing trend for higher sales in the future. Whereas large items only have an increase in spending for one period of time.
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