QL is a worker co-operative. It is equally owned by ten owner-workers and was set up five years ago. QL produces bags, cases and wallets made from leather material. The goods are produced in a small factory using batch production methods. In the last three years QL's revenue and profits have increased significantly (see Table 1). [Table 1: Selected financial data for the last 3 years ($000)] Revenue 2014: 150 2015: 180 2016: 240 Cost of sales 2014: 60 2015: 65 2016: 80 All other expenses 2014: 15 2015: 15 2016: 20 The owner-workers elected Iqbal as the leader of the co-operative. Iqbal is a democratic leader with high levels of emotional intelligence. He is good at listening to the opinions and concerns of the other owner-workers. He makes sure that all major decisions are discussed and voted on by each worker. Due to the success of QL, the owners are considering expanding by producing either high priced leather shoes or low priced leather belts. Information about these two options is shown in Table 2. [Table 2: Information about the two options] Option A: High priced leather shoes • Total market value of $2 million • Branding is more important than the quality of the product • Demand is price inelastic • High level of competition • New production machinery would need to be purchased • Requires new distribution channels Option B: Low priced leather belts • Total market value of $400000 • The quality of the product is more important than branding • Demand is price elastic • Medium level of competition • No new production machinery would need to be purchased • Could use QL's existing distribution channels

1. (a)(i)Define the term ‘batch production' (line 3).[2]
2. (a)(ii)Briefly explain the term 'co-operative' (line 1).[3]
3. (b)(i)Refer to Table 1. Calculate the gross profit margin for 2016.[3]
4. (b)(ii)Explain the importance of profitability to QL.[3]
5. (c)Analyse one advantage and one disadvantage to the other owner-workers of Iqbal's leadership style.[8]
6. (d)Recommend which option QL should choose for expansion. Justify your choice.[11]

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