Loading....
|
Press & Hold to Drag Around |
|||
|
Click Here to Close |
|||
Question 1 Report
Table 1 shows results from a market research survey for PedalFix, a business considering a premium annual bicycle-maintenance membership. Members receive three workshop services each year. The business will charge $28 per service visit. PedalFix has limited mechanics and wants to choose one target market for its first year of sales.
Table 1
| Customer group | People interested in membership | Expected service visits per customer each year | Typical annual income |
|---|---|---|---|
| University students | 210 | 1 | $18,000 |
| Office commuters | 120 | 3 | $46,000 |
| Retired leisure cyclists | 95 | 2 | $31,000 |
(a) Which one of the following groups is the most suitable target market for PedalFix's premium membership?
A university students
B office commuters
C retired leisure cyclists
D people who do not own bicycles [1]
(b) Show the annual sales revenue PedalFix could receive if every interested office commuter bought the membership and used all expected visits. [2]
(c) Explain one reason, using Table 1, why PedalFix may choose the group selected in part (a). [2]
(d) Identify one further item of market research PedalFix should collect before setting its pricing. [1]
(a) Office commuters are the most suitable target market for the premium membership. [1]
(b) Expected annual service visits are:
120 customers × 3 visits each = 360 visits.
Annual sales revenue = 360 × $28 = $10,080. [2]
(c) Office commuters are expected to make three visits per year, more repeat sales per customer than university students or retired leisure cyclists. They also have the highest typical annual income, $46,000, so may be more able to afford premium pricing. Either developed reason is acceptable. [2]
(d) PedalFix could research the maximum price customers are willing to pay. Competitors' repair prices, preferred payment method, or demand for particular maintenance services would also be useful before setting a price. [1]
(a) Office commuters are the most suitable target market for the premium membership. [1]
(b) Expected annual service visits are:
120 customers × 3 visits each = 360 visits.
Annual sales revenue = 360 × $28 = $10,080. [2]
(c) Office commuters are expected to make three visits per year, more repeat sales per customer than university students or retired leisure cyclists. They also have the highest typical annual income, $46,000, so may be more able to afford premium pricing. Either developed reason is acceptable. [2]
(d) PedalFix could research the maximum price customers are willing to pay. Competitors' repair prices, preferred payment method, or demand for particular maintenance services would also be useful before setting a price. [1]
Question 2 Report
Read the information below about Nia's handmade candle business. Nia sells scented candles at a weekend market. Some customers say they would buy a refill rather than a complete new candle jar. Nia is deciding whether to start manufacturing refills. She wants to understand whether this is a real demand from enough customers, not simply an opinion from one person.
(a) Identify one primary market research method Nia could use. [1]
(b) Explain why collecting replies from several customers would be more useful than relying on one comment. [2]
(a) Nia could use a questionnaire or survey to collect primary market research. Interviews and focus groups are also acceptable methods. [1]
(b) Replies from several customers give a more representative indication of demand than one individual's comment. Nia can therefore make a less risky decision about whether to manufacture refills and buy the necessary materials. [2]
(a) Nia could use a questionnaire or survey to collect primary market research. Interviews and focus groups are also acceptable methods. [1]
(b) Replies from several customers give a more representative indication of demand than one individual's comment. Nia can therefore make a less risky decision about whether to manufacture refills and buy the necessary materials. [2]
Question 3 Report
At the start of a weekend market season, Aisha set up a stall selling refillable household products. She put $750 of her own money into the business and borrowed $1800 from a community bank. Her sales have grown, but she must buy containers and cleaning products before receiving payment from two local cafés. Aisha is reviewing the finance used to start the business and the effect on cash available.
(a) Which source of finance did Aisha provide herself? [1]
(b) Identify one reason why a business might use a bank loan rather than all of the owner's savings. [2]
(c) Explain one way that cafés paying the business later could affect its liquidity. [3]
(d) What action could Aisha take to improve the cash position of the business in the short term? [2]
(a) The finance Aisha provided herself was owner's capital, also called personal savings. [1]
(b) A bank loan can provide a larger amount of start-up finance than the owner has in savings. [1] Loan repayments can also be spread over time. [1] Other valid reasons are that the owner keeps savings for personal use and does not have to give another owner a share of the business.
(c) The cafés may have received products, so Aisha has made sales, but she has not yet received the cash. [1] She still needs to pay suppliers for containers and cleaning products. [1] Consequently, she may not have enough cash to meet short-term costs, so liquidity falls. [1]
(d) Aisha could ask cafés to pay sooner by reducing the credit period. [1] She could also request a deposit or part-payment when an order is made. [1] Delaying non-essential spending, using an overdraft, or negotiating longer credit from suppliers would also be valid short-term actions.
(a) The finance Aisha provided herself was owner's capital, also called personal savings. [1]
(b) A bank loan can provide a larger amount of start-up finance than the owner has in savings. [1] Loan repayments can also be spread over time. [1] Other valid reasons are that the owner keeps savings for personal use and does not have to give another owner a share of the business.
(c) The cafés may have received products, so Aisha has made sales, but she has not yet received the cash. [1] She still needs to pay suppliers for containers and cleaning products. [1] Consequently, she may not have enough cash to meet short-term costs, so liquidity falls. [1]
(d) Aisha could ask cafés to pay sooner by reducing the credit period. [1] She could also request a deposit or part-payment when an order is made. [1] Delaying non-essential spending, using an overdraft, or negotiating longer credit from suppliers would also be valid short-term actions.
Question 4 Report
FreshFold is an online clothing business that makes shirts only after customers place orders. A competitor has begun offering next-day delivery from a large warehouse. FreshFold cannot match this delivery speed without holding stock, which could increase costs and the risk of unsold items. The owner is considering a new competitive strategy.
(a) Identify one disadvantage to FreshFold of holding large amounts of stock. [1]
(b) Which one of the following is a suitable way to differentiate FreshFold: made-to-measure shirts, remove all product images, reduce website security or stop responding to customers? [1]
(c) Explain why made-to-measure shirts could be a stronger strategy than attempting to copy the competitor's delivery service. [2]
(a) Holding large amounts of stock can create a risk of unsold stock. [1] It can also increase storage costs or tie up cash that could be used elsewhere.
(b) Made-to-measure shirts are a suitable way for FreshFold to differentiate. [1]
(c) Made-to-measure shirts provide a distinctive benefit that the warehouse competitor may not offer. [1] FreshFold can target customers who value a good fit rather than competing only on next-day delivery, which would require costly stock holding. [1]
(a) Holding large amounts of stock can create a risk of unsold stock. [1] It can also increase storage costs or tie up cash that could be used elsewhere.
(b) Made-to-measure shirts are a suitable way for FreshFold to differentiate. [1]
(c) Made-to-measure shirts provide a distinctive benefit that the warehouse competitor may not offer. [1] FreshFold can target customers who value a good fit rather than competing only on next-day delivery, which would require costly stock holding. [1]
Question 5 Report
A bakery uses an online spreadsheet to share its daily ingredient orders with two suppliers. The head baker enters expected sales of bread and cakes each evening. Suppliers can see the quantities needed the next morning. Previously, orders were sent by handwritten note and sometimes contained errors.
(a) Identify one type of data the baker could enter into the spreadsheet. [1]
(b) Explain one way shared online data could improve the relationship with suppliers. [2]
(a) One suitable item of data is expected sales. The quantity of flour needed or the quantities of ingredients ordered would also be valid. [1]
(b) Shared online data can give suppliers information faster and more accurately than handwritten notes. Suppliers can see the required quantities for the next morning and prepare the correct order, reducing delays and incorrect deliveries. Reliable ordering can improve the relationship between the bakery and its suppliers. [2]
(a) One suitable item of data is expected sales. The quantity of flour needed or the quantities of ingredients ordered would also be valid. [1]
(b) Shared online data can give suppliers information faster and more accurately than handwritten notes. Suppliers can see the required quantities for the next morning and prepare the correct order, reducing delays and incorrect deliveries. Reliable ordering can improve the relationship between the bakery and its suppliers. [2]
Question 6 Report
Table 1 shows quarterly figures from a manufacturer of solar garden lights. The business sells to DIY stores. Its directors are considering whether to start making a lower-priced product for customers during a period of slow economic growth.
(a) Identify the quarter in which sales revenue was lowest. [1]
(b) Show the fall in sales revenue from Quarter 1 to Quarter 3. [1]
(c) Explain one reason why slow economic growth may reduce sales of solar garden lights. [2]
(d) Which pricing strategy could be suitable for a lower-priced product aimed at a price-sensitive market? [1]
(a) Sales revenue was lowest in Quarter 3. [1]
(b) The fall in sales revenue is:
\[£248\,000 - £205\,000 = £43\,000\]
Therefore, sales revenue fell by £43 000. [1]
(c) During slow economic growth, customers may have lower income or less confidence about spending. They may postpone buying non-essential products such as solar garden lights, reducing sales. [2]
(d) Penetration pricing or competitive pricing could suit a lower-priced product aimed at price-sensitive customers. [1]
(a) Sales revenue was lowest in Quarter 3. [1]
(b) The fall in sales revenue is:
\[£248\,000 - £205\,000 = £43\,000\]
Therefore, sales revenue fell by £43 000. [1]
(c) During slow economic growth, customers may have lower income or less confidence about spending. They may postpone buying non-essential products such as solar garden lights, reducing sales. [2]
(d) Penetration pricing or competitive pricing could suit a lower-priced product aimed at price-sensitive customers. [1]
Question 7 Report
Table 1 shows monthly sales revenue and costs for a mobile coffee cart operating at a railway station. The owner is checking whether the business met its profit objective before deciding whether to buy another cart. All figures are for April.
| Item | Amount ($) |
|---|---|
| Sales revenue | 12,600 |
| Cost of coffee, milk and food | 4,100 |
| Wages and stall rent | 5,700 |
(a) Identify the term used to describe sales revenue less the cost of coffee, milk and food. [1]
(b) Show the coffee cart's net profit for April. [2]
(a) Sales revenue less the direct cost of coffee, milk and food is gross profit. [1]
(b) Net profit is revenue less all costs:
\[\$12\,600-\$4\,100-\$5\,700=\$2\,800\]
The coffee cart's net profit for April is $2,800. [2]
Gross profit removes cost of sales only; net profit also deducts expenses such as wages and rent.
(a) Sales revenue less the direct cost of coffee, milk and food is gross profit. [1]
(b) Net profit is revenue less all costs:
\[\$12\,600-\$4\,100-\$5\,700=\$2\,800\]
The coffee cart's net profit for April is $2,800. [2]
Gross profit removes cost of sales only; net profit also deducts expenses such as wages and rent.
Question 8 Report
Read the case study below. Northgate Nurseries sells plants, compost and gardening tools. A drought reduced sales of plants, leaving the business with unsold inventory. The owner is deciding whether to cut prices before the end of the season. Market research suggests customers will buy more if prices fall.
(a) Identify the financial term used for goods held by a business for resale. [1]
(b) Explain one effect that holding too much inventory may have on Northgate Nurseries' cash flow. [2]
(c) What is one possible disadvantage of cutting prices to clear the inventory? [1]
(d) Explain one financial benefit of selling the inventory quickly, even at a lower price. [2]
(a) Goods held by a business for resale are called inventory, also accepted as stock. [1]
(b) Holding excessive inventory means cash has been spent on plants or other goods that have not yet been sold. [1] This cash is tied up, leaving less available to pay suppliers and other short-term costs, so cash flow may worsen. [1]
(c) A disadvantage of cutting prices is a lower gross profit margin, because each item earns less above its cost. Lower sales revenue per item, or customers expecting future discounts, are also valid disadvantages. [1]
(d) Selling the inventory quickly converts stock into cash. [1] This improves liquidity, enabling Northgate Nurseries to pay debts or purchase products that are likely to sell more quickly. [1]
Key distinction: Inventory is an asset, but it cannot pay a bill until it is sold and turned into cash.
(a) Goods held by a business for resale are called inventory, also accepted as stock. [1]
(b) Holding excessive inventory means cash has been spent on plants or other goods that have not yet been sold. [1] This cash is tied up, leaving less available to pay suppliers and other short-term costs, so cash flow may worsen. [1]
(c) A disadvantage of cutting prices is a lower gross profit margin, because each item earns less above its cost. Lower sales revenue per item, or customers expecting future discounts, are also valid disadvantages. [1]
(d) Selling the inventory quickly converts stock into cash. [1] This improves liquidity, enabling Northgate Nurseries to pay debts or purchase products that are likely to sell more quickly. [1]
Key distinction: Inventory is an asset, but it cannot pay a bill until it is sold and turned into cash.
Question 9 Report
Table 1 contains data from a neighbourhood bakery's till records. The owner wants to segment customers by their purchase pattern before deciding which offers to send through the loyalty app.
(a) Which customer group spends the most per visit? [1]
(b) Identify the behavioural measure used to form the customer groups. [1]
(c) Explain one offer that could encourage morning-only customers to visit after 14:00. [3]
(a) Lunch customers spend the most per visit. [1]
Note: the till-record figures in Table 1 are not included in the supplied material; this response follows the supplied mark scheme.
(b) The behavioural measure is the usual time of purchase, also called buying occasion. [1]
(c) The bakery could send an app coupon for an afternoon drink and cake. It gives customers who normally visit only in the morning a reason to try the quieter period after 14:00. This may increase afternoon sales and make better use of staff and stock that are already available. [3]
(a) Lunch customers spend the most per visit. [1]
Note: the till-record figures in Table 1 are not included in the supplied material; this response follows the supplied mark scheme.
(b) The behavioural measure is the usual time of purchase, also called buying occasion. [1]
(c) The bakery could send an app coupon for an afternoon drink and cake. It gives customers who normally visit only in the morning a reason to try the quieter period after 14:00. This may increase afternoon sales and make better use of staff and stock that are already available. [3]
Question 10 Report
Table 1 shows information from a small manufacturer of solar garden lights. The manufacturer has invested capital in machinery and wants to judge whether this investment is producing enough operating profit. It is also deciding whether to start manufacturing a second product.
| Item | Amount ($) |
|---|---|
| Operating profit | 54,000 |
| Capital employed | 360,000 |
| Interest on loan | 12,000 |
(a) Identify the ratio that compares operating profit with capital employed. [1]
(b) Show the return on capital employed. [1]
(c) Explain why the manufacturer should compare this result with a target or competitor result. [2]
(a) The ratio comparing operating profit with capital employed is return on capital employed, usually called ROCE. [1]
(b)
\[\text{ROCE}=\frac{\$54\,000}{\$360\,000}\times100=15\%\]
The return on capital employed is 15%. [1]
(c) A percentage on its own does not show whether performance is good or poor. Comparing 15% with a target or competitor result shows whether the capital is earning an acceptable return relative to alternatives. [2]
(a) The ratio comparing operating profit with capital employed is return on capital employed, usually called ROCE. [1]
(b)
\[\text{ROCE}=\frac{\$54\,000}{\$360\,000}\times100=15\%\]
The return on capital employed is 15%. [1]
(c) A percentage on its own does not show whether performance is good or poor. Comparing 15% with a target or competitor result shows whether the capital is earning an acceptable return relative to alternatives. [2]
Question 11 Report
Read the information below about a sportswear business. Its online market research identifies three groups: competitive runners who value performance fabrics, gym beginners who want low prices, and people who buy clothing mainly for casual wear. The business must choose one segment for a new advertising campaign with a budget of $12 000.
(a) Identify the segment most likely to value performance fabrics. [1]
(b) What type of market segmentation is based on customers' main reason for buying sportswear? [1]
(c) Explain one reason why the business should estimate the size of each segment before selecting its target market. [2]
(d) Explain one reason why the competitive-runner segment may still be selected even if it is smaller than the casual-wear segment. [3]
(a) Competitive runners are most likely to value performance fabrics. [1]
(b) Segmentation based on the main reason for buying is behavioural segmentation, also called benefit segmentation. It groups customers according to the benefit they seek from a product. [1]
(c) The size of a segment shows the number of possible customers. This helps the business estimate likely sales and decide whether enough sales could be generated to recover the $12 000 advertising cost. [2]
(d) Competitive runners may be willing to pay higher prices for specialist performance products. This can create a higher profit margin on each sale. Therefore, even though the segment is smaller than casual-wear buyers, it may generate more profit overall and better meet the business objective. [3]
(a) Competitive runners are most likely to value performance fabrics. [1]
(b) Segmentation based on the main reason for buying is behavioural segmentation, also called benefit segmentation. It groups customers according to the benefit they seek from a product. [1]
(c) The size of a segment shows the number of possible customers. This helps the business estimate likely sales and decide whether enough sales could be generated to recover the $12 000 advertising cost. [2]
(d) Competitive runners may be willing to pay higher prices for specialist performance products. This can create a higher profit margin on each sale. Therefore, even though the segment is smaller than casual-wear buyers, it may generate more profit overall and better meet the business objective. [3]
Question 12 Report
Table 1 shows results from a laundry subscription business. Customers were grouped by household size after a trial of a weekly collection service. The business is considering whether to offer a lower-priced package for smaller households.
(a) Which household segment has the highest average weekly laundry weight? [1]
(b) Identify one reason why a one-person household may not buy the largest package. [1]
(c) Explain why the business could use household size to segment its market. [2]
(d) Show how a package priced at $18 for 6 kg of laundry has a price per kg of $3. [2]
(a) The four-or-more-person household segment has the highest average weekly laundry weight. [1]
Note: the table values are not included in the supplied question material; the identified segment follows the supplied mark scheme.
(b) A one-person household may have less laundry than the largest package allows, or the package may be too expensive for its needs. [1]
(c) Household size affects how much laundry customers need washed. The business can therefore create package sizes and prices that match different households more closely, increasing likely sales. [2]
(d) Price per kilogram is calculated by dividing the package price by its weight:
\[\frac{\$18}{6\text{ kg}}=\$3\text{ per kg}\]
The price is $3 per kg. [2]
(a) The four-or-more-person household segment has the highest average weekly laundry weight. [1]
Note: the table values are not included in the supplied question material; the identified segment follows the supplied mark scheme.
(b) A one-person household may have less laundry than the largest package allows, or the package may be too expensive for its needs. [1]
(c) Household size affects how much laundry customers need washed. The business can therefore create package sizes and prices that match different households more closely, increasing likely sales. [2]
(d) Price per kilogram is calculated by dividing the package price by its weight:
\[\frac{\$18}{6\text{ kg}}=\$3\text{ per kg}\]
The price is $3 per kg. [2]
Question 13 Report
When a flood damaged workshops in a town, a group of carpenters created a limited company to rebuild affordable furniture for affected households. They each invested money and appointed a manager. The business aims to make a profit in the long term, but its immediate objective is to supply safe beds and tables quickly. Suppliers, employees, customers and investors all have an interest in its decisions.
(a) Identify one stakeholder named in the passage. [1]
(b) Explain what is meant by limited liability for an investor in this business. [2]
(c) Explain one possible conflict between customers and investors during the rebuilding project. [3]
(a) One stakeholder named is customers. [1] Suppliers, employees and investors are also named stakeholders.
(b) Limited liability means an investor's financial loss is normally limited to the amount invested in the company. [1] If the company cannot pay its debts, the investor's personal possessions are usually protected. [1]
(c) Customers may want furniture at the lowest possible price, particularly because they need affordable replacements after the flood. [1] Investors may prefer higher prices to increase profit or the return on their investment. [1] The manager must therefore balance affordability for customers against financial return for investors. [1]
Key distinction: Stakeholders can all benefit from a successful business, but their objectives may conflict when the same money or pricing decision affects them differently.
(a) One stakeholder named is customers. [1] Suppliers, employees and investors are also named stakeholders.
(b) Limited liability means an investor's financial loss is normally limited to the amount invested in the company. [1] If the company cannot pay its debts, the investor's personal possessions are usually protected. [1]
(c) Customers may want furniture at the lowest possible price, particularly because they need affordable replacements after the flood. [1] Investors may prefer higher prices to increase profit or the return on their investment. [1] The manager must therefore balance affordability for customers against financial return for investors. [1]
Key distinction: Stakeholders can all benefit from a successful business, but their objectives may conflict when the same money or pricing decision affects them differently.
Question 14 Report
The following example concerns a local cinema that has restored one screen and installed reclining seats. It faces competition from home streaming services. The cinema is considering a higher ticket price for films shown in the upgraded screen, while keeping ordinary-screen tickets unchanged.
(a) Identify the product improvement made by the cinema. [1]
(b) Which customers are most likely to value this improvement? [1]
(c) Explain why the cinema can use different prices for the two screens. [1]
(d) Show how much extra revenue the cinema receives if 80 upgraded tickets are sold at $3 more than ordinary tickets. [2]
(a) The cinema has added reclining seats to an upgraded screen. [1]
(b) Customers wanting a more comfortable or premium cinema experience are most likely to value this improvement. [1]
(c) The upgraded screen offers additional value through its improved seating. Some customers will pay a premium for this experience, while price-sensitive customers can still choose the ordinary screen at the standard price. [1]
(d) Extra revenue equals the number of upgraded tickets multiplied by the extra price per ticket:
\[80 \times \$3 = \$240\]
The cinema receives $240 extra revenue. [2]
(a) The cinema has added reclining seats to an upgraded screen. [1]
(b) Customers wanting a more comfortable or premium cinema experience are most likely to value this improvement. [1]
(c) The upgraded screen offers additional value through its improved seating. Some customers will pay a premium for this experience, while price-sensitive customers can still choose the ordinary screen at the standard price. [1]
(d) Extra revenue equals the number of upgraded tickets multiplied by the extra price per ticket:
\[80 \times \$3 = \$240\]
The cinema receives $240 extra revenue. [2]
Question 15 Report
A furniture manufacturer has been asked by a retailer to produce 500 flat-pack desks each month. The manufacturer buys wood and fittings, cuts the materials, assembles sample desks and packages the finished product. The retailer then sells the desks directly to customers through its website. Both businesses want higher sales but have different roles.
(a) Identify the business that sells directly to final customers. [1]
(b) Which sector does the furniture manufacturer operate in? [1]
(c) Explain one reason why the retailer and manufacturer may need to communicate regularly. [2]
(a) The retailer sells directly to final customers through its website. [1]
(b) The furniture manufacturer operates in the secondary sector, also called the manufacturing sector, because it converts wood and fittings into desks. [1]
(c) The retailer can communicate customer demand or product complaints to the manufacturer. [1] The manufacturer can then change production quantities or alter the desk design, helping to improve sales. [1]
Key distinction: The manufacturer makes the product, whereas the retailer sells it to the final consumer.
(a) The retailer sells directly to final customers through its website. [1]
(b) The furniture manufacturer operates in the secondary sector, also called the manufacturing sector, because it converts wood and fittings into desks. [1]
(c) The retailer can communicate customer demand or product complaints to the manufacturer. [1] The manufacturer can then change production quantities or alter the desk design, helping to improve sales. [1]
Key distinction: The manufacturer makes the product, whereas the retailer sells it to the final consumer.
Question 16 Report
Identify and explain one reason why a clothing retailer might choose a unit beside a university campus rather than a similar unit in a quiet residential street. The retailer sells low-priced fashion items and has a limited promotion budget. Students pass the campus unit throughout the day, while the residential unit has lower rent. The business wants to build awareness of its product quickly after it opens.
(a) Identify one likely advantage of the residential-street unit. [1]
(b) Which location is likely to give the retailer more exposure to its target market? [1]
(c) Explain one reason why the campus location could reduce the need for promotion. [2]
(d) What additional location information should the retailer collect before making its final decision? [1]
(a) A likely advantage of the residential-street unit is lower rent, so operating costs may be lower [1].
(b) The unit beside the university campus is likely to give greater exposure to the target market [1]. Students are the likely customers for low-priced fashion and pass this location throughout the day.
(c) Many students, who are the retailer's target customers, pass the campus unit [1]. They can see the shop and its products without the business paying for advertising [1]. This is especially useful because the promotion budget is limited.
(d) One suitable additional item of information is the pedestrian count [1]. Other acceptable information includes competitor locations, parking or public-transport access, rent and lease terms, or local income levels.
(a) A likely advantage of the residential-street unit is lower rent, so operating costs may be lower [1].
(b) The unit beside the university campus is likely to give greater exposure to the target market [1]. Students are the likely customers for low-priced fashion and pass this location throughout the day.
(c) Many students, who are the retailer's target customers, pass the campus unit [1]. They can see the shop and its products without the business paying for advertising [1]. This is especially useful because the promotion budget is limited.
(d) One suitable additional item of information is the pedestrian count [1]. Other acceptable information includes competitor locations, parking or public-transport access, rent and lease terms, or local income levels.
Question 17 Report
What action is most suitable for a bottled-drinks business trying to reduce plastic pollution? RiverFizz is reviewing its product packaging after a beach-cleaning group found many of its bottles along a local river. The business is considering a deposit-return scheme, thinner labels, a new flavour and longer shop opening hours.
(a) Which action is most suitable for reducing discarded bottles: a deposit-return scheme, a new flavour, longer opening hours or higher staff bonuses? [1]
(b) Explain one reason why a deposit-return scheme may change customer behaviour. [2]
(c) Identify one cost RiverFizz may face when starting this scheme. [1]
(d) Show one way RiverFizz could use market research before introducing the scheme. [1]
(a) A deposit-return scheme is the most suitable action. [1] It directly encourages bottles to be returned rather than discarded.
(b) Customers receive money back when they return bottles. [1] The refund gives them a financial incentive not to throw bottles away, increasing collection for reuse or recycling. [1]
(c) RiverFizz may face the cost of collection machines. [1] Transport, sorting, administration or funding deposits are also acceptable costs.
(d) RiverFizz could survey customers about whether they would be willing to return bottles. [1] Testing the scheme in selected shops would also provide useful market research.
Examination reminder: Link the action to the behaviour it is intended to change: a refund makes returning a bottle worthwhile for the customer.
(a) A deposit-return scheme is the most suitable action. [1] It directly encourages bottles to be returned rather than discarded.
(b) Customers receive money back when they return bottles. [1] The refund gives them a financial incentive not to throw bottles away, increasing collection for reuse or recycling. [1]
(c) RiverFizz may face the cost of collection machines. [1] Transport, sorting, administration or funding deposits are also acceptable costs.
(d) RiverFizz could survey customers about whether they would be willing to return bottles. [1] Testing the scheme in selected shops would also provide useful market research.
Examination reminder: Link the action to the behaviour it is intended to change: a refund makes returning a bottle worthwhile for the customer.
Question 18 Report
Table 1 shows the finance plan of a cosmetics business that has received a large order from a supermarket. It needs ingredients, containers and labels before the supermarket pays its invoice 60 days after delivery.
| Requirement | Amount ($) | Payment timing |
|---|---|---|
| Ingredients | 8,400 | Pay supplier in 30 days |
| Containers and labels | 3,600 | Pay immediately |
| Supermarket sales invoice | 18,000 | Received in 60 days |
(a) Identify the total manufacturing cost shown in Table 1. [1]
(b) Which source of finance could allow the business to receive money from the supermarket invoice earlier: factoring, retained profit or a mortgage? [1]
(c) Explain one disadvantage of factoring for this business. [2]
(d) Explain why finance is needed even though forecast sales are greater than manufacturing costs. [2]
(a) Total manufacturing cost = $8,400 + $3,600 = $12,000. [1]
(b) Factoring can allow the business to receive money from the supermarket invoice earlier. [1]
(c) A factoring company charges a fee or advances less than the full invoice value. This reduces the profit made from the supermarket order. [2]
(d) The ingredients and packaging costs must be paid before the supermarket pays the $18,000 invoice after 60 days. The business can therefore have a temporary cash-flow shortage even though sales revenue is greater than manufacturing cost and the order may be profitable overall. [2]
(a) Total manufacturing cost = $8,400 + $3,600 = $12,000. [1]
(b) Factoring can allow the business to receive money from the supermarket invoice earlier. [1]
(c) A factoring company charges a fee or advances less than the full invoice value. This reduces the profit made from the supermarket order. [2]
(d) The ingredients and packaging costs must be paid before the supermarket pays the $18,000 invoice after 60 days. The business can therefore have a temporary cash-flow shortage even though sales revenue is greater than manufacturing cost and the order may be profitable overall. [2]
Would you like to proceed with this action?