Cambridge International Examinations

Cambridge International General Certificate of Secondary Education

BUSINESS STUDIES 0450/11

Paper 1 Short Answer/Structured Response October/November 2016
MARK SCHEME
Maximum Mark: 80

Published

This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.

Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.

Cambridge will not enter into discussions about these mark schemes.

Cambridge is publishing the mark schemes for the October/November 2016 series for most
Cambridge IGCSE®, Cambridge International A and AS Level components and some Cambridge O Level
components.

® IGCSE is the registered trademark of Cambridge International Examinations.

This document consists of 13 printed pages.

© UCLES 2016 [Turn over

 Page 2 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11

Question Answer Marks Guidance

1(a) What is meant by ‘globalisation’? 2 Note: Do not accept answers that clearly
relate to a business / businesses
Clear understanding [2]: e.g. – the growth in worldwide trade [2]
Freer movement of people and capital between countries [2]
The process of countries becoming more interconnected [2]

Some understanding [1] or identification of one of these features:

trade around the world
rise of multinationals
movement of capital around the world

1(b) Identify two possible threats to C&C from globalisation. 2 Note: Do not accept selling abroad

Application [2 × 1] award one mark per way

Points might include:
• increased competition / increasing imports,
• exchange rates,
• skilled workers leave for jobs elsewhere
• loss of individualised products
• wages increased to match multinational wage rates
• increasing investment from multinationals setting up in home market
• unable to meet demand

© UCLES 2016
 Page 3 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11

Question Answer Marks Guidance

1(c) Identify and explain two suitable ways in which C&C might advertise the 4 Application: skilled, high quality,
job vacancies. demand, factory, shoes or associated
words as leather, sewing, global,
Knowledge [2 × 1] – award 1 mark for each relevant way production, good reputation
Application [2 × 1] – award 1 mark for each relevant explanation
Relevant points might include: Do not accept: ‘in the street’,
• Job centre [k] as local shoemakers would look here for jobs [app] internal / external, Internet or posters on its
• advertising in newspaper [k] as skilled it is labour [app] own.
• specialist (trade magazines) [k] as looking for people to hand make
shoes [app] Award relevant examples of either two
• recruitment agency [k] so C&C can focus on meeting the extra external or one example of each
demand [app]
• jobs website / own website / social media [k]
• internal newsletter [k]
• Radio / television [k]
• Word of mouth [k]

1(d) Identify and explain two benefits to C&C of having full-time employees. 6 Application: skilled, high quality, demand,
factory, shoes or associated words such
Knowledge [2 × 1] – award 1 mark for each advantage identified as leather, sewing, global, 120 (workers)
Application [2 × 1] – award 1 mark if relevant reference made to C&C 100 000 (shoes), 20 production
Analysis [2 × 1] – award 1 mark for each relevant explanation employees)
Relevant points might include:
• Easy to communicate / update [k] on new styles [app] as employees Note: must link advantage to C&C to be
always there [an] rewarded. E.g. ‘Feel more secure’ alone is
• Motivated / More committed to the business [k] so likely to produce too vague as this is about the employee
enough shoes [an] to help meet the growing demand [app] and not the business.
• Fewer workers needed [k] therefore less administration needed [an]
• No need to train regularly [k] as these are skilled workers [app] so Do not accept: fast / quicker production,
able to maintain quality / output [an] higher output / quality, increased efficiency
or work harder as K points. Candidate
• internal pool of candidates for promotion [k] which can help keep
must explain ‘why’ these occur.
recruitment costs low [an]

© UCLES 2016
 Page 4 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11

Question Answer Marks Guidance

1(e) Do you think C&C should introduce new technology into the production 6 Application: 20 production employees,
process? Justify your answer. 120 staff, 100 000 pairs of shoes, exports
10% of output, skilled, high quality,
Knowledge [1] – award 1 mark for identification of relevant issue(s). Positive demand, factory, shoes or associated
or negative points allowed [max 1] words such as leather, sewing.
Application [1] – award 1 mark if relevant reference made to C&C’s business
Analysis [2] – award up to 2 marks for relevant development of point(s) Note: points can relate to employees or
Evaluation [2] – justified decision made as to whether C&C should introduce the business
technology into the production process
Relevant points might include: Accept: ‘Faster / quicker / saves time,’ as
• Increased production [k] as need to produce 100 000 each year [app] correct knowledge, given that current
so able to work all the time [an] production is hand-made.
• Consistent quality [k] as machinery likely to make fewer errors [an]
which can help retain / enhance reputation [app] For evaluation either viewpoint is
• Risk to reputation [k] as known for its hand-made shoes [app] so acceptable.
fewer people may demand its products [an]
• Impact on employee motivation [k] as work could become less
interesting [an] so quality of shoes falls [app]
• Risk of job insecurity [k] as it replaces some / all the skilled workers
[app] which could lower efficiency [an]
• Cost of investment / retraining [k]

© UCLES 2016
 Page 5 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11

Question Answer Marks Guidance

2(a) What is meant by ‘Return on capital employed’? 2 Note: Must show the awareness of the
relationship between profit and capital
Clear understanding [2]: ROCE means the profit of the business expressed employed for 2 marks
as % of capital invested in the business or correct formula.
(Profit / Capital employed × 100)
Some understanding [1] – e.g. profit from capital invested or money made on
investment

2(b) What is meant by a ‘recession’? 2 Note: Do not accept features, such as

‘high unemployment’
Clear understanding [2] – a sustained (over a period of time) reduction in
GDP / national income / output
Some understanding [1] – ‘fall in output’ or ‘fall in GDP’

2(c) Identify and explain two ways in which the size of the business may 4
benefit Dowson. Application: recession, overdraft $6 m,
large / big, electrical goods, shops, larger
Knowledge [2 × 1] – award 1 mark for each relevant advantage range of goods. Use of figures from table
Application [2 × 1] – award 1 mark for each relevant explanation in context of 1.
Dowson
Relevant points might include: Accept: Economies of scale [K] if no
• Able to attract better employees [k] so have the expertise to survive specific examples given.
the recession [app]
• Access to finance [k] as seen as lower risk of failing [app]
• Discounts for bulk buying [k] so able to charge lower prices for
electrical goods [app]
• Marketing economies or bigger marketing budget [k] as able to justify
national advertising [app]
• Spread risk [k] as can afford to stock a wide range of products [app]
• Able to dominate the market / large market share [k] so difficult for
small retailers to compete [app]

© UCLES 2016
 Page 6 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11

Question Answer Marks Guidance

2(d) Identify and explain two problems for Dowson of having a high level of 6 Application: recession, overdraft $6m,
debt. large / big, electrical goods, shops,
liquidity, use of numbers from table 1.
Knowledge [2 × 1] – award 1 mark for each advantage identified
Application [2 × 1] – award 1 mark if relevant reference made to Dowson Note: Do not accept bankruptcy / closure
Analysis [2 × 1] – award 1 mark for each relevant explanation of business as knowledge
Relevant points might include:
• High financial risk [k] so banks / suppliers might be reluctant to lend
to them [an] so not able to stock a wide range of electrical products
[app]
• Higher expenses [k] which will reduce level of profit [an]
• Problems if interest rates rise [k] as might not be able to meet
repayments [an] increasing risk Dowson also fails [app]
• Difficult to raise additional finance [k] if lenders fear Dowson not able
to repay further loans [an]
• Cash flow implications / liquidity [k] as acid test ratio is only 0.5: [app]
could lead to insolvency [an]

© UCLES 2016
 Page 7 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11

Question Answer Marks Guidance

2(e) Do you think the Finance Director is right to be pleased with the 6 Application: marks may be awarded for
liquidity of the business? Justify your answer using the ratio results in appropriate use of the following: current
Table 1. ratio 1.2:1, 1.5:1, or change by 0.3, acid
test ratio 0.8:1, 0.5:1, Acid test fallen by
Knowledge [1] – award 1 mark for identification of relevant points 37.5%, Current ratio increased by 25%,
Application [1] – award 1 mark if relevant reference made to Dowson’s stockholding has risen, recession,
business overdraft $6m, large / big, electrical goods
Analysis [2] – award up to 2 marks for relevant development of point(s)
Evaluation [2] – justified decision made as to whether the Finance Director is
right to be pleased about liquidity
Relevant points might include:
• Current ratio increased [k] by 0.3 [app][an] so more liquid [an]
• Acid test lower [k] from 0.8 to 0.5 [app] so not able to pay short-term
debts [an] possibly due to high value of its inventory [an]
• Expenses are high [k] as have a high level of debts, which includes
$6 m overdraft [app]
• Risk that demand might fall [k] due to recession [app] therefore he
would be left with excess stock [an]
• High level of inventory [k] 66% of current assets [app] [ an]
• High level of trade receivables [k] danger that customers might not
pay [an] due to recession [app] so business will lack the cash it
needs [an]
• Current ratio shows the business is able to pay its short-term debts
[k]

© UCLES 2016
 Page 8 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11

Question Answer Marks Guidance

3(a) Identify two reasons why a government might support business start- 2 Note: Do not allow ‘improving the
ups. economy’ or ‘to receive tax’ or ‘increasing
the economy’.
Knowledge [2 ×1] award one mark per reason
Points might include: reduce unemployment, increase competition, increase
output, benefit society, small businesses can grow

3(b) Identify two parts (other than marketing) of a business plan. 2 Note: Accept any piece of information that
would be included in a business plan that
Knowledge [2 ×1] award one mark per part is NOT marketing.
Points might include: cash flow forecast, location, human resources plan,
production details, business aims

3(c) Identify and explain two possible pricing methods that Amelia might 4 Application: sweets / candy, new
use. business, business plan, money spent on
packaging, secondary data, people like
Knowledge [2] – award 1 mark for each role identified sweets, niche market, adult.
Application [2] – award 1 mark for each relevant reference to this business
Relevant points might include:
• penetration pricing [k] as need to get people to try her sweets [app]
• price skimming [k] as it’s a niche market [app]
• cost plus pricing [k] as likely to have large set up costs [app]
• promotional pricing [k]
• competitive pricing [k]
• psychological pricing [k]

© UCLES 2016
 Page 9 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11

Question Answer Marks Guidance

3(d) Identify and explain two reasons why packaging is important for 6 Application:
YOGO’s products. Sweets / candy, new business, business
plan, secondary data, people like sweets,
Knowledge [2 × 1] – award 1 mark for each relevant role niche market, adult, food product. taste
Application [2 × 1] – award 1 mark if relevant reference made to this business
Analysis [2 × 1] – award 1 mark for each relevant explanation
Relevant points might include:
• List ingredients [k] as it’s a food product [app] must state what it
contains to avoid legal action [an]
• Promotion / to attract customers [k] to buy[an] from the new business
[app]
• Inform [k] customers about its flavours [app] so people know what is
in its products [an]
• Protection / keep item fresh [k] so the sweets are not damaged [app]
otherwise products might be wasted [an]
• Boost brand image / impression of high quality [k] as it is a niche
market [app] which can help increase sales / revenue [an]
• Easier to store / transport [k]

© UCLES 2016
 Page 10 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11

Question Answer Marks Guidance

3(e) Do you think Amelia’s business would benefit from primary market 6 Application:
research? Justify your answer. sweets / candy, new business, business
plan, secondary data, people like sweets,
Knowledge [1] – award 1 mark for identification of relevant point(s) niche market, adult, food product, money
Application [1] – award 1 mark if relevant reference made to Amelia’s spent on packaging
business
Analysis [2] – award up to 2 marks for relevant development of point (s) Note: Do not reward identification of
Evaluation [2] – justified decision made as to whether Amelia would have methods of primary research alone as the
benefited from carrying out primary market research question is asking for the benefits
Relevant points might include:
• It is expensive [k] spends a lot on packaging [app] therefore may not For evaluation either viewpoint is
be able to afford it [an] acceptable
• It is time consuming [k] she has already done secondary research
[app] so how much more can she find out [an]
• Collect precise information[k] on sweets [app] so that she can
produce the most appropriate products[an]
• Secondary data may be outdated [k] [app]Needs might have
changed [an]
• Help better target promotion / in pricing decisions [k] especially as
new business [app]

© UCLES 2016
 Page 11 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11

Question Answer Marks Guidance

4(a) Identify two functions of management. 2

Knowledge [2 ×1] award one mark per function

Points might include: planning, organising, co-ordinate, command, control,
motivate / supervise, decision making, problem solving, recruit

4(b) Calculate DCP’s average cost per litre. 2

Good application [2] 30 c or 0.3 (per litre )

Some application [1] e.g. total cost divided by output OR 450 000 / 1 500 000

4(c) Identify and explain two ways in which DCP might communicate with its 4 Application: paint or use of associated
customers. words such as walls, litres, colour, 6 large,
business customers, competitive market,
Knowledge [2 × 1] – award 1 mark for each relevant reason high quality, different countries, operations
Application [2 × 1] – award 1 mark for each relevant explanation manager
Relevant points might include:
• Email / website / social networks [k] as customers are in different Methods identified must be appropriate for
countries [app] a large business customer
• Meetings [k] as only have 6 customers [app]
• Phone / text [k] as able to quickly check information about paint Do not accept:
orders [app] internal communication e.g. memos,
• Letter [k] noticeboard, categories such as written or
• faxes [k] verbal on their own, primary methods of
research

© UCLES 2016
 Page 12 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11

Question Answer Marks Guidance

4(d) Identify and explain two possible reasons why quality is important to 6 Application: paint, litres, colour, 6
DCP. business customers, competitive market,
high quality, industrial, different countries,
Knowledge [2 × 1] – award 1 mark for each reason use of numbers
Application [2 × 1] – award 1 mark if relevant reference made to DCP
Analysis [2 × 1] – award 1 mark for each relevant explanation Candidates may consider why reducing
Relevant points might include: quality is a problem
• Good reputation / brand image [k] so customers trust the paint [app]
which could help increase sales [an]
• Attract new customers [k] as products might be better than rivals
[app]
• Meet legal controls [k] as contains chemicals [app] must be safe to
avoid being prosecuted / sued [an]
• More competitive [k] as paint is very similar [app] this could give
them a competitive advantage over its rivals [an]
• Create brand / customer loyalty [k] so business [app] customers
keep returning [an]
• Can charge a higher price [k] than 35 c per litre [app] to increase
revenue [an]
• sales might fall [k] if quality is lowered [an] because it is a
competitive market [app]

© UCLES 2016
 Page 13 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 11

Question Answer Marks Guidance

4(e) Do you think charging a higher price is the best way for DCP to increase 6 Application: paint or use of associated
profit? Justify your answer. words such as walls, litres, colour,
cheaper materials, 6 business customers,
Knowledge [1] – award 1 mark for identification of relevant points competitive market, high quality, industrial,
Application [1] – award 1 mark if relevant reference made to DCP’s business different countries, use of numbers
Analysis [2] – award up to 2 marks for relevant development of point
Evaluation [2] – justified decision made as to whether charging a higher price Note: The answer should focus on price or
is the best way to increase profits cost changes
Relevant points might include:
• Revenue could increase[k] and if quantity and costs of the paint
[app] remain the same profit could increase [an] Note: Do not award candidates who only
• Demand may fall [k] as customers might choose rival products [an] in discuss alternative ways to increase profit,
this competitive market [app] for example, advertising.
• if demand is price inelastic [k] higher price will see a lower fall in
demand [an] therefore revenue will rise [an] For evaluation either viewpoint is
• business may be able to lower costs [k] therefore increasing profit acceptable
with current prices [an]
• It would reinforce the image [k] of high quality [app] customers might
be happy to pay it [an]
• depends on actions of competitors [k]

© UCLES 2016
 Cambridge International Examinations
Cambridge International General Certificate of Secondary Education

BUSINESS STUDIES 0450/21

Paper 2 Case Study October/November 2016
MARK SCHEME
Maximum Mark: 80

Published

This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.

Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.

Cambridge will not enter into discussions about these mark schemes.

Cambridge is publishing the mark schemes for the October/November 2016 series for most
Cambridge IGCSE®, Cambridge International A and AS Level components and some Cambridge O Level
components.

® IGCSE is the registered trademark of Cambridge International Examinations.

This syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.

This document consists of 11 printed pages.

© UCLES 2016 [Turn over

 Page 2 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 21

1 (a) P & P needs to be efficient. Identify and explain four methods P & P could use to
motivate production workers. [8]

Application [4 × 1] – award one mark for each relevant method for production workers
Analysis [4 × 1] – award one mark for explanation of how each method increases motivation

Award one mark for each relevant method (maximum of four), such as:

• increase wages
• training
• profit sharing
• praise
• piece rate
• employee of the month
• bonus
• change in leadership style
• fringe benefits
• better working conditions
• job rotation
• job enlargement
• setting targets
• promotion

Indicative response:

Introduce piece-rate [ap] because if the production workers produce more paint they will be
paid more and so they will be motivated to work harder [an].

© UCLES 2016
Page 3 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 21

(b) P & P has developed a new type of paint. Consider the following three factors that will
affect the channel of distribution the company will use. Which factor will be the most
important when deciding the best channel of distribution? Justify you answer. [12]

Relevant points might include:

Where customers are • do they deliver paint or do customers purchase from the shops
located • are they close to the factory – may use direct selling – lower
transport costs
• may require selling agents is exporting

How often the product • purchased regularly – may need to be sold in shops near to
is purchased customers/less often then customers may be willing to travel to
large shops to purchase paint
• may use wholesaler/middleman if bought less frequently

Where competitors • may need to sell paint in same retail outlets to competitors –
sell their products outlet already attracts many customers
• don’t sell at the same outlets as competitors – may need to
reduces price/sales

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 conclusion as to which factor will be the most
important when choosing a channel of distribution and why not the alternative
channels.

7–8 marks for some limited judgement shown in conclusion as to which factor
will be the most important when choosing a channel of distribution.

Level 2 4–6 marks

Detailed discussion of the factors affecting the choice of channel of distribution
for the new type of paint.

Level 1 1–3 marks

Outline the factors affecting the choice of channel of distribution.

Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Where do competitors sell their
paint.

© UCLES 2016
Page 4 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 21

Level 2 – one L2 explanation can gain 4 marks and a further mark can be awarded for each
additional L2 explanation (max 6 marks) e.g. Where do competitors sell their paint. They may
want to sell paint in large shops where many brands of paint are sold so that when
customers are looking for paint they will see their brand of paint as well and be more likely to
buy it than if they sell the paint in shops where no other paint is sold. 4 marks for L2 answer).

Level 3 – For L3 to be awarded there need to be at least two L2 marks awarded and then a
recommendation which justifies which factor is the most important when selecting the
channel of distribution to use.

Award up to 2 additional marks for relevant application.

Possible application marks: paint manufacturer; factory; large limited company; imports raw
materials; capital city; country X; sells to large retailers; uses batch production; new
waterproof paint; target market professional painters; new paint for outside of houses; start
exporting paint in 2018.

There may be other examples in context which have not been included here.

© UCLES 2016
 Page 5 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 21

2 (a) Identify and explain two reasons why P & P might respond to the pressure group and
change what the company is doing. [8]

Knowledge [2 × 1] – award one mark for each reason

Analysis [2 × 1] – award one mark for a relevant explanation for each reason
Application [2 × 2] – award two application marks for each reason

Award one mark for each reason (maximum of two), such as:

• Want to keep a good reputation for being environmentally friendly

• Wants to keep customers from switching to competitors
• Does not want to upset local residents
• Wants to avoid fines or legal action
• Wants to keep a favourable reputation for being a good employer

Award a maximum of three additional marks for each explanation – 2 of which must be
applied to this context – of why the business might respond to the pressure group and
change what the company is doing.

Indicative response:

To not lose customers who may buy from competitors if they are against businesses polluting
the environment (k). The pollution affects a lot of people such as fishermen (ap) and may
mean there are a greater number of people lobbying the government for the company to
reduce pollution put into the river (ap). The more people affected then the more effective the
pressure group and the more likely they are to change to another company if P & P do not
change the way they produce paint (an).

Possible application marks: the Government of country X; paint manufacturer; large

limited company; large factory next to a river; pollution; waste; dumping in the river;
makes tins (cans) of paint; sells to large retailers; 150 production workers; employees
live near to the factory; details of two options outlined in Appendix 2; details of pollution
caused by paint production outlined in Appendix 3.

There may be other examples in context which have not been included here.

© UCLES 2016
Page 6 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 21

(b) P & P production results in external costs as outlined in Appendix 3. Consider the
external costs and external benefits of the production of paint by P & P. Recommend
whether the Government should take any action. Justify your answer. (12)

Relevant points might include:

External costs Pollution – waste put into river makes children ill, kills fish,
people can no longer catch their own fish, have to buy fish
now – no clean water

External benefits Provides jobs; increased sales for fish sellers; taxes paid to
government

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 whether or not
the government should take any action.

7–8 marks for some limited judgement shown in recommendation as

to whether or not the government should take any action.

Level 2 4–6 mark

Detailed discussion of external costs and benefits on third parties.

Level 1 1–3 marks

Outline of external costs and benefits.

Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. The company puts waste
products into the river,

Level 2 – one L2 explanation can gain 4 marks and a further mark can be awarded for each
additional L2 explanation (max 6 marks) e.g. The company puts waste products into the river
and this kills the fish leading to local people have to increase their spending on food which
leaves them less to spend on other products. (4 marks for L2 answer plus one application
mark for mentioning catching fish from the river).

Level 3 – For L3 to be awarded there need to be at least two L2 marks awarded and then a
recommendation whether the government should introduce regulations on the activities of
this company.

© UCLES 2016
 Page 7 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 21

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; makes tins (cans) of paint; pressure groups; sells
to large retailers; uses batch production; 150 production workers; employees live near to
the factory; details of two options outlined in Appendix 2; details of pollution caused by
paint production outlined in Appendix 3. No credit for paint but ok for pollution.

There may be other examples in context which have not been included here.

3 (a) 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:

• Size of the output/ level of demand

• Various styles of product made
• Easier/quicker to respond to changes in demand
• Not enough capital to use capital-intensive methods

Award a maximum of three additional marks for each explanation – 2 of which must be
applied to this context – of the factor which may have influenced the decision to use batch
production.

Indicative response:

Size of the output [k] as if a large output is not required then flow production will not be used
as too many products will be produced (an). Paint has many colours and types and so only a
certain quantity of one type will be needed (ap). P & P will produce a certain amount of, for
example bathroom paint and then a certain amount of kitchen paint because the demand will
not be high for all types of paint (ap).

Possible application marks: different colours of paint; 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.

© UCLES 2016
Page 8 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 21

(b) 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

© UCLES 2016
 Page 9 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 21

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.

4 (a) Identify and explain two reasons why added value is important to P & P. (8)

Knowledge [2 × 1] – award one mark for each relevant reason

Analysis [2 × 1] – award one mark for a relevant explanation for each reason
Application [2 × 2] – award two application marks for each reason

Relevant points might include:

Award one mark for each reason (maximum of two), such as:

• Allows costs to be paid

• Ensures a profit is made
• Prices could be increased

Award a maximum of three additional marks for each explanation – 2 of which must be
applied to this context – of the reason why added value is important.

Indicative response:

Allows costs to be paid (k) as wages and other factory costs are paid out of the revenue from
sales of paint (ap) and the price of paint is higher than the total costs of producing it (ap).
This means that P & P will make a profit (an).

Possible application marks: paint manufacturer; large limited company; imports raw
materials; makes tins (cans) of paint; sells to large retailers; uses batch production; 150
production workers; new waterproof paint; target market professional painters; new paint for
outside of houses; start exporting paint in 2018; increase in imports of paint.

There may be other examples in context which have not been included here.

© UCLES 2016
Page 10 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 21

(b) P & P is planning to start selling its products in other countries by 2018. Consider
each of the three following changes the company could make. Which one of these
changes will be most helpful in selling products to other countries? Justify your
answer. (12)

Relevant points might include:

Advantages Disadvantages

Take over a retail Will own many outlets to Expensive to buy shares
business in one of the sell their paint in the other business
other countries

Change to a public limited So they can sell shares to Accounts are public and
company to raise the public may be able to be taken
additional capital Pay additional costs of over
exporting/expanding

Form joint ventures in the Local knowledge of the Have to share information
other countries overseas market. and profit.

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 conclusion as to which change will be most
helpful when selling products abroad.

7–8 marks for some limited judgement shown in conclusion as to which

change will be most helpful when selling products abroad.

Level 2 4–6 marks

Detailed discussion of advantages and/or disadvantages of each
possible change.

Level 1 1–3 marks

Outline of advantages and/or disadvantages of each possible change.

Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Remaining a private limited
company means the business will keep its accounts private.

Level 2 – 1 × L2 explanation can gain 4 marks and a further mark can be awarded for each
additional L2 explanation (max 6 marks) e.g. Changing to a public limited company means
the business will not keep its accounts private and so it will be easier for competitors to
obtain information about the company. However, it will be able to obtain capital from selling
shares as it can now sell shares to more than family and friends and this will enable it to
cover the increase in costs from starting to export. (4 marks for L2 answer).

© UCLES 2016
Page 11 Mark Scheme Syllabus Paper
Cambridge IGCSE – October/November 2016 0450 21

Level 3 – for L3 to be awarded there need to be at least two L2 marks awarded and then a
justified conclusion as to which change will be most helpful when selling products abroad.

Award up to 2 additional marks for relevant application.

Possible application marks: paint; country X; paint manufacturer; large limited company;
imports raw materials; makes tins (cans) of paint; sells to large retailers; new waterproof
paint; new paint for outside of houses; start exporting paint in 2018; wants to increase
output; increase in imports of paint.

There may be other examples in context which have not been included here.

© UCLES 2016