Business Studies · Oct / Nov 2025 · Paper 12 · Question 4

0450

As printed in the paper

The question as text

DJU manufactures clothing including jeans and trousers. There are 90 employees working in its factory. DJU uses specialisation when making its products. The Managing Director is reviewing 4 DJUis cost and output data. An extract is shown in Table 4.1. She wants to know how lower interest rates might affect the business. DJUis directors are considering different ways a business could grow including taking over a competitor. Table 4.1 Extract from DJUis cost and output data (per week) $400000 Fixed costs $595000 Total costs 85000 units Total output

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

Show the answer and mark scheme

4(a)[2]
Define ‘fixed costs’. 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]
Costs that do not vary in the short run with the number of items sold/produced [2]
Partial definition e.g.
Costs that do not change [1]
2 Do not award:
Answers which confuse the term with variable costs.
Examples.
4(b)[2]
Calculate DJU’s average cost per week. Show your working. Award 2 marks for a correct answer. Award 1 mark for correct method but incorrect answer. Correct answer: $7 or 7 [2]
Correct method but incorrect answer e.g.
Total cost (of production) / total output [1]
$595 000 / 85 000 [1]
If correct answer given with no working shown, award 2 marks. 2 Award only 1 mark if $7 is written as part of the answer but is not given as the final answer. $ sign not required. Max 1 if answer refers to 7 units.
4(c)[4]
Outline two ways lower interest rates might affect DJU. Award 1 mark for each relevant way (max 2). Award 1 mark for each relevant reference to this business (max 2). Points might include:
Increased demand/sales [k] for its clothing [app]
Lower costs / cheaper to borrow money [k] for the factory [app]
Encourage DJU to invest (more) in the business / more likely to apply for a loan [k] as the business is considering ways to grow [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:
Clothing or examples such as jeans/trousers
90 (employees)
Factory
Use specialisation
Grow/expand the business / takeover a competitor
$595 000 (total costs per week)
$400 000 (fixed costs per week)
85 000 (units per week)
$7 (average cost) OFR applies Other appropriate examples can be credited.
4(d)[6]
Explain one advantage and one disadvantage to DJU of using specialisation when making its products. Award 1 mark for identification of each relevant advantage/disadvantage (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: Advantages:
Higher output/quantity produced [k] of clothing [app] so able to meet orders (on time) [an]
Quicker/cheaper to train employees [k] so does not increase total cost costs [an] above $595 000 (per week) [app]
Increased efficiency [k] which can increase output / lead to less waste [an] in the factory [app]
Employee should become a skilled/expert / employee can specialise in what they are good at [k] becoming more efficient in that task [an]
Easier to use machinery to perform tasks [k] which can speed up production [an]
Fewer mistakes/errors made / better quality [k] leading to fewer customer complaints / lower costs of production / better reputation / less waste [an] Disadvantages:
Workers less motivated [k] of the 90 employees [app] so maybe more likely to leave the business / more errors [an]
Workers cannot cover for absent colleagues / may be the only person who can do that task/job [k] which could mean manufacturing may stop / slow down [an]
Need to train employees [k] increasing training costs / increased cash outflows [an]
Not spread risk [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:
Clothing or examples such as jeans and trousers
90 (employees)
Factory
$595 000 (total costs per week)
$400 000 (fixed costs per week)
85 000 (units per week)
(Different ways a) business can grow/takeover a competitor
Reduction in interest rates
$7 (average cost) OFR applies Other appropriate examples can be credited. Some points could be awarded as either [k] or [an] but do not award the same point twice e.g. higher quality, efficient, fewer mistakes. Some [an] can be used for different points but only award once. More sales/customers is [an] only. Can award points about a business specialising in producing a single product.
4(e)[6]
Do you think the advantages of taking over a competitor are greater than the disadvantages? 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 the advantages of taking over a competitor are greater than the disadvantages. Points might include: Advantages:
Reduced/less competition [k] increasing sales [an] AND/OR increase revenue [an]
Gain brand name/image of competitor / better reputation [k] leading to increasing customer loyalty [an] AND/OR more sales [an]
Economies of scale [k] leading to lower average/unit costs [an]
Access new skills/expertise/resources/ideas (from other business) [k]
More capacity/output [k] leading to possible economies of scale [an] Disadvantages:
Increased costs [k] which the business might not be able to afford [an]
Possible clash of management styles [k] leading to wrong decisions being taken [an]
Could demotivate employees [k] lowering efficiency [an]
Difficult to coordinate [k] could lead to mistakes/errors [an]
Poor communication [k] which could demotivate employees [an]
Less choice for customers [k] Other appropriate responses should be credited. Justification might include: One advantage of a taking over a competitor is less competition [k] which could allow the business to increase prices [an]. However, there could be a high cost [k] which the business might not be able to afford [an]. The advantages are greater because the combination of less competition and higher prices may lead to higher revenue [eval] which may help cover the costs of the takeover [eval]. 6 This is a general question so there are no marks for application. To access evaluation must refer to both an advantage and disadvantage. For evaluation to be awarded justification will usually follow on from relevant analysis of points. Some points could be awarded as [k] or [an], but only award once. Can accept economies and diseconomies of scale where no specific examples given. Do not award:
Answers about monopolies.
Answers about forward/backward integration.

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.