Business Studies · May / June 2025 · Paper 12 · Question 4

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MHL manufactures tyres for large vehicles. It has factories in 6 countries. The business creates external costs when producing its products. Good communication with MHLs suppliers is important. 4 The Managing Director knows globalisation provides many opportunities for MHL. She is reviewing data for one of MHL’s factories as she wants to reduce the average cost of the tyres. An extract from this data is shown in Table 4.1. Table 4.1 Data for one of MHLs factories 200000 Output per month (units) $500000 Fixed costs per month $25 Variable cost per unit

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4(a)[2]
Define ‘average cost’. Award 2 marks for a full definition. Award 1 mark for a partial definition.
Total cost divided by (total) output [2]
Total cost divided by the number of items produced/made [2]
The cost of producing a single product/unit of output [2]
Partial definition e.g.
Cost divided by output [1]
Total cost divided by number of units [1]
2
4(b)[2]
Calculate total variable cost per month. Show your working. Award 2 marks for a correct answer. Award 1 mark for correct method but incorrect answer. Correct answer:
$5 million [2]
5 million/5m [2]
5 000 000 [2]
Correct method but incorrect answer e.g.
Output × variable cost per unit [1]
200 000 × $25 [1]
If correct answer given with no working shown award 2 marks. 2 Award only 1 mark if $5 million is written as part of the answer but is not given as the final answer. $ sign is not needed for 2 marks but million is. Must have correct number of zeros e.g. 500 000 [0]
4(c)[4]
Outline two external costs MHL might create when producing its products. Award 1 mark for each relevant external cost (max 2). Award 1 mark for each relevant reference to this business (max 2). Points might include:
Loss of space/land use/deforestation [k] for the factories [app]
Pollution or examples such as smoke/fumes/noise/chemicals in the air [k] when making tyres [app]
Deplete natural resources [k] to make 200 000 units [app]
Loss of wildlife [k] in the 6 countries [app] Other appropriate responses should be credited. 4 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:
Tyres or examples such as rubber
Factories/factory
6 countries
(Opportunities of) globalisation
200 000 units (each month)
$25 (variable cost per unit)
$500 000 (fixed costs) Other appropriate examples can be credited.
Max 1 mark for examples of pollution.
4(d)[6]
Explain two opportunities of globalisation for MHL. Award 1 mark for identification of each relevant opportunity (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:
Increase potential sales/access more markets [k] for its tyres [app] increasing revenue/increase market share [an]
Cheaper/access (better quality) raw materials from other countries [k] for its factories [app] could help improve the profit margin [an]
Lower wages/cheaper labour [k] in the 6 countries [app] reducing (labour) costs [an]
Avoid/fewer quotas [k] which could limit quantity sold/able to sell [an]
Avoid/lower tariffs [k] so does not make products more expensive [an]
Access new technologies [k] which could improve efficiency/allow new product development [an]
Access to government grants (in other countries) [k] Other appropriate responses should be credited. 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:
Tyres or examples such as rubber
Factories/factory
6 countries
200 000 units (each month)
$25 (variable cost per unit)
$500 000 (fixed costs) Other appropriate examples can be credited.
4(e)[6]
Explain two methods of communication a business could use to communicate with its suppliers. Which is likely to be the best method 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 which is the best method of communication for a business to use when communicating with its suppliers. Points might include:
Email [k] can be saved for future reference [an]
Phone/telephone calls [k] as these allow for (immediate) feedback [an]
(Online) meeting [k] allows everyone to discuss points/ask questions [an]
Video conference/Zoom/Teams/Google Meet/FaceTime [k] as people do not have to travel [an]
Text/SMS/WhatsApp/WeChat/(Facebook) messenger [k] but can contain limited information [an]
Letter [k] but time consuming to write/expensive to send [an]
Websites [k] but no feedback/one way communication [an] Other appropriate responses should also be credited. 6 This is a general question so there are no marks for application. Candidates must name the method to access the knowledge mark. For evaluation to be awarded justification will usually follow on from relevant analysis of points. To access [eval], must discuss 2 valid methods of communication. Do not award answers such as written/verbal/visual as need to specify the method. Guidance Justification might include: One method is a meeting [k] allows everyone to discuss points at the same time [an]. Another option is an email [k] because it is quick to send [an]. Email is a better method because it could allow the business to get the inventory it needs in a timely manner whereas the meeting could take too long to arrange [eval], and while waiting the business may have to stop production temporarily [eval].

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