Farm Produce (FP) FP is a primary sector co-operative made up of six farms in country G. Each farm grows a range of fruit and vegetables. FP employs 26 workers across the farms and distribution centre. Each farm transports its fruit and vegetables to the distribution centre where they are packaged and sent to customers' homes. Table 1.1 contains data about the farming industry in country G. Table 1.1: Data about the farming industry in country G • Farms producing fruit and vegetables are given an annual government grant. • Most farms are labour intensive. • The government promotes the importance of eating fresh fruit and vegetables. • Most farms are small family businesses. • Minimum wage for farm workers will increase by 10% next year. FP's customers pay for a box of seasonal fruit and vegetables that is delivered each week. Data about the different box sizes sold by FP is shown in Table 1.2. Table 1.2: FP's cost and price data | Box size | Variable cost per box () | Allocated monthly fixed costs () | Price per box ($) | Sales in April 2022 | |:---------|:--------------------------|:----------------------------------|:------------------|:--------------------| | Small | 8 | 2000 | 10 | 400 | | Medium | 10 | 2000 | 20 | 300 | | Large | 15 | 2000 | 35 | 150 | FP is concerned about the profitability of the small box size. It believes it should stop selling this product.

Mark scheme

Marking points from the official mark scheme (May/June 2022). The mark or mark type is shown in brackets.

1. [1] use of a high number of employees/manual/workers
2. [1] as opposed to a high level of capital (no/limited machinery involved)
3. [1] Two or more businesses/parties agreeing to work together
4. [1] Shared risk/reward/facilities/staff/capital/knowledge/experience/promotion etc...
5. [1] Example or some other way of showing good understanding, i.e. formal contract. To award C there must be understanding that this is not a merger (i.e. remain separate businesses).
6. [1] Total Revenue (TR) calculation: (400 x $10) + (300 x $20) + (150 x $35) = $15250
7. [1] Total Variable Cost (TVC) calculation: (400 x $8) + (300 x $10) + (150 x $15) = $8450
8. [1] Total Fixed Cost (TFC) calculation: $2000 + $2000 + $2000 = $6000
9. [1] Profit calculation: $15250 - $8450 - $6000 = $800
10. [1] Identification of one problem of allocating fixed costs (e.g., takes time, takes money, difficulty separating by box size, makes a product appear unprofitable, leads to a pricing mistake).
11. [1] Explanation of one problem of allocating fixed costs in context (e.g., FP has three box sizes, same $2000 FC for each, different prices/VC/sales for each box size).
12. [1] Knowledge of stakeholders (e.g., Managers, Owners/shareholders/members, Employees, Customers/consumers).
13. [1] Application of stakeholders to FP (e.g., Owners are members of FP co-operative, Employees are 26 workers, Customers buy 400 small boxes).
14. [1] Analysis of impact on stakeholders (e.g., Customers may have to move to competitors or pay for a larger box – increased price – less disposable income – lower quality of life).
15. [1] Analysis of impact on stakeholders (e.g., Owners/members – if customers move to competitors, then less sales revenue – lower profitability).
16. [1] Knowledge of factors affecting supply (e.g., price, costs, indirect tax, subsidies, legislation, capacity, weather, technology, productivity).
17. [1] Application to FP context (e.g., Agriculture, Annual government grant, Minimum wage set to increase, 26 workers across farms and distribution centre, Labour intensive production, Food products).
18. [1] Analysis of impact on supply (e.g., increase in price may lead FP to an increase in (quantity) supplied - gain more revenue and increase the profitability of the boxes).
19. [1] Analysis of impact on supply (e.g., increase in costs may lead to lower quantity of boxes and/or increase in price - lower profit/profitability).
20. [1] Evaluation point (e.g., A judgement over importance of factors affecting supply of FP's products).
21. [1] Evaluation point (e.g., Evaluation of the relative impact of different factors).
22. [1] Evaluation point (e.g., Elements that the evaluation/judgement might depend upon: level of competition, current pay of workers, elasticity, complements, substitutes etc.).