Business Studies · Oct / Nov 2024 · Paper 21 · Question 3
0450
As printed in the paper
Show the answer and mark scheme
3(a)[8]
Explain two benefits and two limitations of CC using batch production. Award 1 mark for each relevant benefit/limitation (max 4). Award 1 additional mark for each explanation of the benefit/limitation applied to this context. Relevant benefits might include:
Flexible way of working – can easily change to produce cookies for different special occasionsMore variety in tasks than if flow production is used – better motivation for the 10 production employeesMore variety of products produced - to have personal messages written on themProduction may not be affected too much if baking equipment breaks downLarger quantity produced than job production – can keep restocking the shop with full variety of cookiesRaw materials can be purchased in larger quantities than job production so gain discounts / economies of scale / lower unit cost of fresh ingredients Relevant limitations might include:Can be expensive / awkward to move part-finished goods around the factory – the business is only smallMachines have to be reset between batches – takes time / delays production for the new Operations ManagerOne mistake in production may mean the whole batch is affected / needs to be thrown away – wasted ingredientsWarehouse space needed - for finished batches stored before being sold in CC’s shopSize of batch may be too small – not enough cookies to meet demand / may be too large / left over cookies if not popularMay be more repetitive than job production – 10 production workers may become bored For example: Flexible way of working (1)and can easily change the production process to produce different types of cookies (app). Application could include: cookies;
sells at own shop;
messages put on cookies;
10 production employees;
5 shop employees;
Operations manager;
fresh ingredients;
special occasions;
small business;
sole trader;
established for 5 years;
competitors’ products sold in retail shops in other cities, personalised messages.
3(b)[12]
Consider the two options for CC’s new cookies outlined in Appendix 3. Which option should CC choose to produce? Justify your answer using appropriate calculations. Level Description Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of both products. Well-justified recommendation. Candidates discussing both products in detail, in context and with a well-justified recommendation, including why the alternative product 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 product. Judgement with some justification / some evaluation of choice made. Candidates discussing both products 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 products with little / no explanation. Simple judgement with limited justification / limited evaluation of choice made. Candidates outlining both products in context should be rewarded with the top marks in the band. 1–4 No creditable response. Relevant points might include: Option 1
Sales are higher by 6500 per month – 8000 compared to 1500Total cost is $7000 per monthTotal revenue is $8000 per monthProfit per month is $1000, $500 less than Option 2Forecast growth is high so revenue in the future should increaseGross profit margin 50%Profit margin 12.5%Break-even output 6000 cookies a month, 2000 less than predicted sales Option 2Total revenue $7500Total cost is $6000 per month with same fixed cost of $3000 and variable cost of $2 per cookieProfit per month is $1500Forecast low growth so revenue in the future may not increaseGross profit margin 60%Profit margin 20%Break-even output 1000 cookies a month, 500 less than the predicted sales Recommendation Justification might include:Option 1 is the better one to choose as the revenue is higher by $500 than Option 2. Even though its profit is $500 per month lower than Option 2 it has high future growth opportunities and could earn higher revenue and higher profit in the future.Option 2 is better than Option 1 as it has a higher profit by $500 per month. The gross profit margin and profit margin are both higher giving more profit from the sale of each Option 2 cookie.
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