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Business Studies · Oct / Nov 2025 · Paper 22 · Question 3

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  • 3(a)[8]

    Explain two reasons why FF uses job production. Award 1 mark for reason why FF uses job production (max 2). Award a maximum of 3 additional marks for each explanation of why FF uses job production – one of which must be applied to this context. Reasons might include:

    Is suitable for individual/unique products – makes them more competitive – leading to higher revenue/sales
    Meets the exact needs of customers – so increases customer satisfaction – increases reputation and word of mouth advertising
    The employees have more varied jobs – as may carry out all the tasks to produce the product – increasing employee motivation
    A higher price can be charged – as the product is a ‘one-off’ for the customer – willing to pay a higher price for a product that is exactly what they want
    Production can be of a higher quality – because each product is individually made For example: The flower shop will produce wedding flower arrangements (app) that are specially designed for customers (1)

    and more closely meets the exact needs of these customers (1)

    so is more likely to increase customer recommendations (1). Application could include: new shop/third shop;

    2 shops;

    flowers;

    source of finance required for working capital;

    weddings;

    bride/groom;

    ribbons;

    reputation for high quality;

    contribute to sustainable development;

    targets a niche market;

    4/8 employees at each shop;

    bride;

    average price paid is $2000;

    supplies purchased each day;

    supplies are fresh;

    small business;

    marketing mix for the new shop;

    social media reviews.

  • 3(b)[12]

    Consider the following two sources of finance which could be used for working capital when FF’s new shop opens. Which would be the best source for Kathryn to use? Justify your answer.

    Bank overdraft
    Trade credit Level Description Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of both sources of finance. Well-justified recommendation. Candidates discussing in detail both sources of finance, in context and with a well-justified recommendation, including why the alternative source is 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 one or more sources of finance. Judgement with some justification / some evaluation of choice made. Candidates discussing both sources of finance 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 sources of finance with little/no explanation. Simple judgement with limited justification / limited evaluation of choice made. Candidates outlining both sources of finance in context should be rewarded with the top marks in the band. 1–4 No creditable response. Relevant points might include: Advantages Disadvantages Bank overdraft
    Can be quick to arrange – so finance available straight away
    May be arranged for varying lengths of time for repayment – longer time to pay it back from the sale of wedding flowers – helping to avoid a cash flow problem
    Amount overdrawn will have to be repaid with interest – increases expenses – may lead to higher prices for flower arrangements charged or reduced profits
    May need to provide collateral – may lose assets if overdraft cannot be repaid
    May have to pay a high interest rate due to it being a small business and may be seen as high risk – raises costs further
    Interest rate may be variable so if interest rates increase later FF will be affected – increased risks for FF Advantages Disadvantages Trade credit
    Is effectively an interest-free loan – unless penalties for late payment are made
    May be able to receive revenue from sales of flowers before paying supplier as has a good relationship with her supplier – improves cash flow
    Supplier may refuse to supply if payment is not made as agreed – may damage the relationship with supplier – unable to meet orders spoiling FF’s good reputation
    Supplier may refuse to offer discounts for the flowers at all if payment is not made as agreed – may increase costs – which could lead to higher prices as FF may use cost-plus pricing Recommendation Justification might include:
    A bank overdraft is the best source of finance to use as a sufficient amount of capital may be arranged which will pay for all the operating costs for the new flower shop. Some suppliers may not be willing to provide FF with trade credit leaving them short of working capital.
    Trade credit is the best source of finance to use as FF can use it to purchase the flowers and then sell them to receive the revenue before payment is due. This is an interest free source of finance for the day-to-day running of the third shop.
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