Cambridge Assessment International Education

Cambridge International General Certificate of Secondary Education

*5052446396*

BUSINESS STUDIES 0450/11

Paper 1 October/November 2019
1 hour 30 minutes

Candidates answer on the Question Paper.

No Additional Materials are required.

READ THESE INSTRUCTIONS FIRST

Write your centre number, candidate number and name in the spaces at the top of this page.
Write in dark blue or black pen.
You may use an HB pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.

Answer all questions.

The businesses described in this question paper are entirely fictitious.

At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
The total number of marks for this paper is 80.

This syllabus is regulated for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.
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This document consists of 9 printed pages and 3 blank pages.

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1 BFF makes a range of computer screens that it sells to other manufacturers. The Managing Director
has been looking at BFF’s income statement. She is worried about the effects of an increase in the
cost of materials. She said: ‘Changes in technology have improved our production methods. BFF
needs to remain competitive as imports of computer screens are increasing.’ The Managing Director
has to decide whether BFF should increase its prices.

(a) What is meant by ‘income statement’?

...........................................................................................................................................

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........................................................................................................................................... [2]

(b) Identify the effect of an increase in the cost of materials on each of the following:

Cost of sales: ....................................................................................................................

...........................................................................................................................................

Gross profit: ......................................................................................................................

........................................................................................................................................... [2]

(c) Identify and explain two ways in which BFF’s managers could use information contained in
the income statement.

Way 1: ...............................................................................................................................

...........................................................................................................................................

Explanation: ......................................................................................................................

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Way 2: ...............................................................................................................................

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Explanation: ......................................................................................................................

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(d) Identify and explain two ways changes in technology used in production could help BFF to
remain competitive.

Way 1: ...............................................................................................................................

...........................................................................................................................................

Explanation: ......................................................................................................................

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Way 2: ...............................................................................................................................

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Explanation: ......................................................................................................................

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(e) Do you think BFF should increase its prices? Justify your answer.

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2 WKN sells household goods such as plates and brushes. Last year sales in WKN’s 200 shops
increased but profit fell by 80% to $5m. WKN’s Human Resources Director said: ‘All retailers are
finding this stage of the business cycle challenging. WKN has to reorganise the business. This will
mean redundancy for 1800 shop workers. WKN plans to create 100 new jobs in the marketing
department at head office to help maintain customer loyalty. The company is working with trade
unions to carry out these changes.’ WKN has to decide whether to select the candidates for the
new jobs from the workers being made redundant.

(a) Identify two stages of the business cycle.

Stage 1: ............................................................................................................................

...........................................................................................................................................

Stage 2: ............................................................................................................................

........................................................................................................................................... [2]

(b) What is meant by ‘redundancy’?

...........................................................................................................................................

Clear understanding [2]: e.g. job position has gone and so the employee is no longer required
...........................................................................................................................................
Do not award reasons why the job may no longer exist
Termination of employment because the job is no longer needed
...........................................................................................................................................

........................................................................................................................................... [2]

(c) Identify and explain two ways a trade union could help WKN’s employees.
Negotiate or help improve pay [k] for shop employees [app]
Way 1: ...............................................................................................................................
• Improved working conditions or health and safety [k] in head office [app]
...........................................................................................................................................

• Gives ......................................................................................................................
Explanation: strength in numbers/collective bargaining so more likely to achieve demands
[k] when dealing with head office [app]
...........................................................................................................................................
• Take action (strikes/protests) [k] to prevent redundancy [app]
Way 2: ...............................................................................................................................
• Provides services such as insurance / training / social activities/ discounts [k]
...........................................................................................................................................
• Resolve conflict between employer and employees [k]
Explanation: ......................................................................................................................
• Advice / legal support [k]
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(d) Identify and explain two advantages to WKN of maintaining customer loyalty.

Advantage 1: ....................................................................................................................

...........................................................................................................................................

Explanation: ......................................................................................................................

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Advantage 2: ....................................................................................................................

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Explanation: ......................................................................................................................

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(e) Do you think WKN should select all the workers for the new jobs from those about to be made
redundant? Justify your answer.

Do not need to advertise jobs externally [k] so lower(recruitment) costs [an]

...........................................................................................................................................

• Know abilities and skills of employees [k]

...........................................................................................................................................

Existing employees have good knowledge of customer requirements [k] as have experience
...........................................................................................................................................
of working in its shops [app]
...........................................................................................................................................
• Workers might not have skills [k] which could lead to poor work [an] reducing customer loyalty [app]
...........................................................................................................................................
• May not want or be able to move locations [k] to head office [app] so few employees will want to apply [an]
...........................................................................................................................................
• Recruitment of new workers will bring fresh ideas [k]
...........................................................................................................................................

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3 Keila owns a successful small bakery shop. Keila would like to expand her business. She could
open a café selling cakes and drinks in a popular tourist location. Keila plans to give out free samples
as her main method of promotion. She has prepared some customer and cost information as shown
in Table 1. Keila used primary market research to find out some of the information.

Table 1: Forecast customer and cost information for the new café

Average amount spent per customer $4

Average number of customers per week 325

Variable costs per customer $2

Fixed costs per week $500

(a) What is meant by ‘fixed costs’?

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........................................................................................................................................... [2]

(b) Calculate the forecast revenue per week for the new café.

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(c) Identify and explain two advantages to Keila’s business of using free samples as a method
of promotion.

Advantage 1: ....................................................................................................................

...........................................................................................................................................

Explanation: ......................................................................................................................

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Advantage 2: ....................................................................................................................

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Explanation: ......................................................................................................................
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(d) Identify and explain one advantage and one disadvantage to Keila’s business of using primary
market research.

Advantage: .......................................................................................................................

...........................................................................................................................................

Explanation: ......................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

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Disadvantage: ...................................................................................................................

...........................................................................................................................................

Explanation: ......................................................................................................................

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(e) Do you think Keila should open the new café? Justify your answer using the information in
Table 1.

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4 VXH produces a range of soft drinks made from fruit using batch production. VXH uses specialisation
in its factory. The business has grown quickly over the last two years. VXH has increased the
number of production workers from 40 to 80. This has increased the span of control for each
manager. It has been difficult for VXH to keep workers motivated. The Human Resources Manager
has to decide whether it is better to use job rotation or financial bonuses to improve employee
motivation.

(a) What is meant by ‘span of control’?

Clear understanding [2]: Number of subordinates working directly under an individual OR manager
...........................................................................................................................................
Number of subordinates reporting to each supervisor / manager
...........................................................................................................................................

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........................................................................................................................................... [2]

(b) What is meant by ‘uses specialisation’?

...........................................................................................................................................

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........................................................................................................................................... [2]

(c) Identify and explain two possible reasons why VXH has grown quickly.

Reason 1: .........................................................................................................................

...........................................................................................................................................

Explanation: ......................................................................................................................

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Reason 2: .........................................................................................................................

...........................................................................................................................................

Explanation: ......................................................................................................................

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(d) Identify and explain two possible reasons why VXH uses batch production.

Reason 1: .........................................................................................................................

...........................................................................................................................................

Explanation: ......................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

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Reason 2: .........................................................................................................................

...........................................................................................................................................

Explanation: ......................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [6]

(e) Do you think VXH should use job rotation or financial bonuses to increase employee motivation?
Justify your answer.

Job rotation:
...........................................................................................................................................
• Prevents workers becoming bored doing the same task repeatedly [k] which could increase output [an]
...........................................................................................................................................
• Need to provide training [k] to the 80 employees [app] which increases cost [an]
...........................................................................................................................................
• Helps improve flexibility [k] as workers can switch if someone is absent [an]
...........................................................................................................................................
• Workers may not be good at the new task [k] so productivity decreases [an]
...........................................................................................................................................

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