Business Studies · May / June 2023 · Paper 12 · Question 1

0450

As printed in the paper

The question as text

FBW manufactures watches using job production. It employs 5 full-time production employees. Each worker is offered regular training. Last year FBW sold 600 watches. The Managing Director 1 plans to use break-even analysis to help decide whether to increase the price of its products. FBW’s current break-even chart is shown in Fig. 1.1. 0 0 20 000 40 000 60 000 80 000 100 000 120 000 100 200 300 400 500 600 700 800 number of watches costs and revenue $ Break-even chart for FBW’s watches total revenue total costs fixed costs Fig. 1.1

Read automatically from the paper; the printed page above is exact.

Show the answer and mark scheme

1(a)[2]
Identify two reasons why a business might offer training to its employees. Award 1 mark per reason (max 2). Points might include:
To introduce a new process/new equipment
Improve efficiency/productivity
Increase output
Reduce mistakes/fewer errors/better quality goods or services
Improve employee skills
Increase knowledge
Improve motivation
Help reduce labour turnover
Decrease the chance of accidents
Familiarise new employees with business/other employees Other appropriate responses should also be credited. 2 Only award the first two responses given.
1(b)[2]
Calculate the following values using Fig. 1.1: Award 1 mark for each correct answer. Break-even output: 500 (watches) [1]
Break-even revenue: $60 000 OR 60 000 [1]
1(c)[4]
Outline two possible effects on FBW’s break-even chart if the prices of its products are increased.
Award 1 mark for each relevant effect (max 2).
Award 1 mark for each relevant reference to this business (max 2). Points might include:
Reduce/lower break-even output [k] below 500 units [app]
Increase the margin of safety [k] above 100 [app]
Increase contribution per unit [k] when using job production [app]
Increase revenue [k] from sale of its watches [app]
Reduce break-even revenue [k]
Increase profit margin [k]
Increase (potential) profit/reduce (potential) loss [k]
Other appropriate responses should also be credited.
1(d)[6]
Explain two benefits to FBW of having full-time employees.
Award 1 mark for identification of each relevant benefit (max 2).
Award 1 mark for each relevant reference to this business (max 2). Award 1 mark for each relevant explanation (max 2).
Points might include:
Workers likely to be more loyal/committed [k] so lower labour turnover/lower cost of recruitment [an] for its 5 employees [app]
Easy to communicate/update [k] when making its watches [app] so could be more efficient [an]
Consistent standard of work [k] leading to better reputation [an] which is helpful as using job production [app]
Fewer workers needed [k] so less training required [an]
Less employees to manage [k] so managers can focus on other issues [an]
Employees become more familiar with the business [k]
Always available/can find when needed [k]
Other appropriate responses should also be credited.
1(e)[6]
Do you think job production is the best method of production for a small business to use? Justify your answer.
Award up to 2 marks for identification of relevant points.
Award up to 2 marks for relevant development of points.
Award up to 2 marks for a justified decision as to whether job production is the best method of production for a small business to use.
Points might include:
Job production:
Meet exact customer requirements [k] which increases customer loyalty/sales [an]
Unique/high-quality products [k] can charge higher price [an]
Products made to order/can take a long time to make [k] so low output [an]
No economies of scale [k] leading to higher average cost [an]
Skilled labour is needed [k] increases labour/training costs [an]
Requires a lot of employees/labour intensive [k]
Batch production [k]:
Some economies of scale [an]
Able to produce more [an] so unit costs lower [an]
Can produce range/variety of products [an]
Demotivated employees [an] increasing labour turnover [an]
Machines must be reset between batches [an]
Added cost of moving/storing semi-finished goods [an]
Warehouse space is needed [an]/increases storage costs [an] Other appropriate responses should also be credited.
Justification might include:
Job production allows a business to produce goods that meet exact customer demands [k] so able to charge a higher price [an]. However, skilled labour can cost more [k] which can lead to high labour costs [an]. Overall, I think job production is not the best method for a business, especially if it is small as the number of sales may not cover the additional cost of the labour [eval] so the business is unable to make a profit. [eval]

Practise this paper →

Make a free account to save your answers and see your weak topics and ask the AI why a wrong answer is wrong.