Business Studies · Oct / Nov 2016 · Paper 21 · Question 3

P & P has decided to use batch production to produce the new paint. Identify and explain two factors which may have influenced this decision. (8)

Knowledge [2 × 1] – award one mark for each relevant factor Analysis [2 × 1] – award one mark for a relevant explanation for each factor Application [2 × 2] – award two application marks for each factor Award one mark for each relevant factor (maximum of two), such as:

paint manufacturer;

paint tins;

large limited company;

sells to large retailers;

150 production workers;

employees live near to the factory;

paid using time-rate and no fringe benefits;

new waterproof paint;

new machinery/equipment to make the paint;

details of two options outlined in Appendix 2. There may be other examples in context which have not been included here.

Consider the two options outlined in Appendix 2 for increasing the output of paint. Recommend which option the directors should choose. Use the cost data in Appendix 2 to help justify your answer. (12) Relevant points might include: Option A – $150 000 × 10% = cost of $15 000 interest per year. Option B – $75 000 × 10% = cost of $7 500 interest / yr plus $10 000 = $17 500 / year. Option A land cost + factory + machinery = $150 000 (L1) Option B land cost + lease = $85 000 (L1) Option B will be $72 500 cheaper in the first year (L2) Option A Option B Output 200 000 (appendix 2) 102 500 (appendix 2) Cost $100 000 (appendix 2) $75 000 (appendix 2) Factory + machinery $50 000 (appendix 2) Lease $10 000 (appendix 2) Interest paid $15 000 (L2) $7 500 (L2) Total cost in the first year $165 000 (L2) $92 500 (L2) Cost per tin $0.83 (L2) $0.90 (L2) Knowledge/Analysis/Evaluation – award up to 10 marks using the levels-based mark scheme below. Knowledge/Analysis/ Evaluation Level 3 At least 2 × Level 2 + 9–10 marks for well justified recommendation as to the best option to choose compared to the alternative option. 7–8 marks for some limited judgement shown in recommendation as to the best option to choose. Level 2 4–6 marks Option A and B discussed including calculation of costs. Level 1 1–3 marks Option A and B outlined including comparison of costs/use of cost information. Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Option A is more expensive than Option B Level 2 – 1 × L2 explanation can gain 4 marks and a further mark can be awarded for each additional L2 explanation (Max 6 marks). Option A is more expensive than Option B but when calculating the costs per tin then Option A is cheaper at $0.83 per tin compared to Option B of $0.90 per tin. (5 marks) Level 3 – For L3 to be awarded there need to be at least two L2 marks awarded and then a recommendation which justifies which is the best option to choose. Award up to 2 additional marks for relevant application. Possible application marks: paint manufacturer;

large limited company;

imports raw materials;

large factory next to a river;

uses batch production;

150 production workers;

start exporting paint in 2018;

details of option 1 – 200 000 tins of paint, $100 000 land cost, $50 000 factory and machinery, interest rate of 10% ;

details of option 2 – 102 500 tins of paint, $75 000 extension cost, $10 000 lease, interest rate of 10% There may be other examples in context which have not been included here.