Analyse how cost information can be used to monitor and improve the performance of a business.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2020). The mark or mark type is shown in brackets.

1. [2] (a) Knowledge and Understanding: clear understanding of cost information.
2. [2] (a) Knowledge and Understanding: clear understanding of business performance.
3. [2] (a) Application: reference to the concept of cost information to the performance of a business.
4. [4] (a) Analysis: information about business costs is critical to management decisions, encompassing different types of cost.
5. [4] (a) Analysis: monitoring performance and strategies for improvement are vital management decisions.
6. [4] (a) Analysis: cost information related to pricing, budgets, targets, profitability, and competitors is essential for managers.
7. [4] (a) Analysis: comparisons can be made internally and externally using cost data.
8. [4] (a) Analysis: strategies can be changed (e.g., cost reduction strategies) based on cost information.
9. [4] (a) Analysis: cost information may suggest the need for different production methods/pricing strategies.
10. [4] (a) Analysis: cost information can be used to control present activities, evaluate past activities, and plan for the future.
11. [4] (a) Analysis: cost variances can be analysed to identify significant factors needing attention.
12. [4] (a) Analysis: costs may be benchmark indicators of internal and external performance.
13. [4] (a) Analysis: helps with break-even analysis.
14. [4] (a) Analysis: Accept any other valid response.
15. [7-8] (a) Level 4: Good analysis of how cost information can be used to monitor and improve the performance of a business.
16. [5-6] (a) Level 3: Limited analysis of how cost information can be used to monitor and improve the performance of a business.
17. [3-4] (a) Level 2: Application of how cost information can be used to monitor and improve the performance of a business.
18. [1-2] (a) Level 1: Knowledge and understanding of cost information/business performance.
19. [2] (b) Knowledge and Understanding: clear understanding of cash flow forecasting.
20. [2] (b) Application: reference to cash flow forecasting and a new car hire company.
21. [2] (b) Analysis: initial definition of CFF.
22. [2] (b) Analysis: initial identification of challenges facing any new/start-up business.
23. [2] (b) Analysis: review of potential benefits of CFF (e.g., identifying potential shortfalls, early warning system, ensuring payment to employees/suppliers, assisting cash flow management, identifying specific cash deficiency periods, providing vital information to external stakeholders like banks).
24. [2] (b) Analysis: specifically for a new car hire business, indicates need to lease vs. purchase cars, how to deal with maintenance/renewal costs, seasonal cash flow issues.
25. [6] (b) Evaluation: judgement/conclusion on the importance of cash flow forecasting to a new car hire business.
26. [6] (b) Evaluation: discuss difference between survival in short-term and success in longer-term.
27. [6] (b) Evaluation: suggest other factors (value proposition, customer relationships, cost structures, revenue streams, profitability) may rank in importance alongside CFF, once short-term survival is secured.
28. [6] (b) Evaluation: suggest other factors (quality of management/leadership, systems, quality of product offer, pricing strategy, marketing) may be equally/more important than CFF.
29. [6] (b) Evaluation: Accept any other valid response.
30. [9-12] (b) Level 4: Effective evaluation of the importance of cash flow forecasting to a new car hire business.
31. [7-8] (b) Level 3: Limited evaluation of the importance cash flow forecasting to a new car hire business.
32. [3-6] (b) Level 2: Analysis and application of the importance of cash flow forecasting to a new business.
33. [1-2] (b) Level 1: Knowledge and understanding of cash flow forecasting/new business.