UC is a private limited company providing engine parts for commercial aircraft. It uses batch production in factory A and flow production in factory B. As part of UC's commitment to corporate social responsibility (CSR), it provides a training scheme for the long-term unemployed, based in factory A. UC's products are sold to aircraft engine manufacturers. Demand for aircraft engines has increased by 45% over recent years. The aircraft engine manufacturers want inventory just when needed and are demanding a reduction in prices. In 2017, UC opened factory B which is 5 km away from factory A. Factory B has a high level of automation, resulting in low unit costs for the parts produced there. Production is capital intensive. UC has a plan to automate factory A. The production workers are not happy about this proposal and have asked for more details. The workers' representatives have asked for a meeting with the human resource manager. In December 2019 a fault was discovered in one of the engine components supplied by UC and produced in factory A. UC had to recall 2000 parts at a cost of 200000. This has had an impact on part of its triple bottom line and UC is unlikely to meet its targets. Table 1.1 shows some financial data for UC. Table 1.1: Financial data for UC | | Year ending 30 November 2019 (m) | Year ending 30 November 2020 ($m forecast) | |---| | Revenue | 5.8 | 6.4 | | Cost of sales | 2.3 | 3.4 | | Expenses | 1.3 | 1.6 | | Cost of recall | - | 0.2 | Amjit, the human resource manager, believes that the fault was caused by the negligence of Jack, one of the production supervisors. Jack claims that he was made to work overtime to try and meet production targets. This caused him to become tired and make a mistake in one batch of parts. Amjit wants to dismiss Jack.

Mark scheme

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

1. [2] A correct definition
2. [1] A partial, vague or unfocused definition
3. [0] No creditable content
4. Answers could include: When a company aims to act ethically and responsibly to ensure that the public perceives it positively and may help to attract new customers.
5. A correct definition should include the following elements (allow one mark for each element): • Acts ethically / in the interests of society / the environment • Helps attract new customers / considers impact on stakeholders / business objective beyond legal obligations
6. Exemplar: Businesses act ethically and consider the impact of their actions on customers [2] Both elements – ethically and impact on a stakeholder (customers)
7. Exemplar: Where a business considers the impact on the environment [1] One element only
8. Exemplar: CSR is a business objective [0] Not defined
9. Rationale C An explanation of all three elements of a triple bottom line to include, e.g. an example or some other way of showing a good understanding [1]
10. Rationale B An understanding of all three elements of a triple bottom line [1]
11. Rationale A An understanding of two elements of a triple bottom line [1]
12. Answers could include: The 3Ps of people, planet and profit. Broader measure than the financial bottom line to include a measure of businesses social responsibility, economic value, and environmental impact.
13. Exemplar: It is to maximise profits for shareholders, taking care of the environment and benefitting the community [3] All 3 elements + example 'maximising profits for shareholders'
14. Exemplar: The triple bottom line includes social, environmental and economic objectives [2] All 3 elements but no expansion
15. Exemplar: Triple bottom line puts the planet before profit [1] Only 2 elements
16. Exemplar: The triple bottom line refers to the base objectives of a business [0] NAQ no explanation or evidence of understanding
17. [3] Correct answer with or without correct working or %
18. [2] Formula and correct calculation of profit
19. [1] Formula or correct calculation of profit for end of Nov 2020
20. [0] No creditable content
21. e.g. Profit margin = (profit / total revenue) x 100 (1)
22. Profit for end of Nov 2020 = 6.4m – (3.4m + 1.6m + 200 000) = $1.2m (1)
23. $1.2m / $6.4m = 0.1875 (2)
24. (1.2m/6.4m) x 100= 18.75% (3)
25. Accept any answer between 18.7% and 19% (3)
26. % not required for full marks
27. OFR*
28. Common incorrect/correct answers: 18.75 [3] Correct answer does not need %
29. Common incorrect/correct answers: 18.8% [3] Correctly rounded answer (1 dec place)
30. Common incorrect/correct answers: 19% [3] Correctly rounded answer (0 dec places)
31. Common incorrect/correct answers: 0.1875 [2] Incomplete calculation – did not x100
32. Common incorrect/correct answers: [3- (1.6 – 0.2)] / 6.4 x 100 = 25% [2] Method is correct except (1.6 – 0.2) should be (1.6 + 0.2), a mistake in the sign. This is an example of *OFR below
33. Common incorrect/correct answers: 25% (no working) [0] No calculation and wrong answer
34. Common incorrect/correct answers: Profit margin = (profit/total revenue) x 100 [1] Formula only
35. Common incorrect/correct answers: $1.2m [1] Correct calculation of profit
36. *OFR means the use of the own figure rule – this aims to reward a candidate for the stages of a calculation that are correct, even if an earlier stage or figure used is incorrect. An early mistake, for example, would create all following calculations to have wrong answers, but these are still rewardable (if correct when using a candidate's own figures) Therefore the candidate cannot gain marks for the stage that was incorrect, but can gain all the subsequent marks.
37. [3] APP Explanation of an effect of a decrease in profit on UC
38. [2] K+K Explanation of an effect of a decrease in profit
39. [1] K Identification of an effect of a decrease in profit
40. [0] No creditable content
41. Context and content is likely to come from: Possible effects may include: • May affect surplus for reinvestment in the apprenticeship scheme • May affect demand if business confidence in UC falls • May delay plans for factory A • May cause employees to worry which could lead to demotivation
42. Identification of an effect (K - 1 mark): May have to decrease costs; Explanation (K+K - 2 marks): to avoid getting into debt; Possible context (APP - 3 marks): so may cut its training scheme for the long-term unemployed
43. Identification of an effect (K - 1 mark): They have less to invest in the business; Explanation (K+K - 2 marks): which could affect expansion plans; Possible context (APP - 3 marks): such as the automation of factory A
44. [8] Level 2 Shows understanding of two effects, on other employees, of dismissal in context (4 marks K+App) Developed analysis of two effects, on other employees, of dismissal in context (4 marks Analysis)
45. [4] Level 1 Shows knowledge of two effects of dismissal (2 marks K+App) Limited analysis of two effects of dismissal (2 marks Analysis)
46. [0] Level 0 No creditable content
47. Dismissal is when an employee is asked to leave the workplace for misconduct or for disobeying company rules and policies.
48. Context could come from • Jack's negligence causing faulty part - Is the dismissal fair? • Because of the recall cost, there will be a reduction in profit - some employees may be asked to leave • Accelerate the automation of factory A – less need for production supervisors or other workers • Effect on motivation to work overtime • Uncertainty/distrust of management
49. Example of an effect (K): Other employees may have an increased workload; Examples of application/context (APP): as they may have to cover Jack's supervisor role; Examples of possible analysis (AN + DEV): hence this increased workload could cause them to become tired, (AN) make more mistakes and fear dismissal (DEV)
50. Example of an effect (K): It could lead to the firm becoming more capital intensive; Examples of application/context (APP): Jack's mistake, which lead to his dismissal, could accelerate plans to automate factory A; Examples of possible analysis (AN + DEV): with more consistent production (due to automation) there will be less need for production supervisors (AN) or other workers. They may find it hard to get another job as those workers were previously long-term unemployed (DEV)
51. [11] Justified recommendation based on arguments in context
52. [6] Developed recommendation based on arguments in context
53. [5] A recommendation based on arguments in context
54. [4] Shows understanding of two aspects of automation in context
55. [4] Arguments (two-sided) based on the advantages and disadvantages of automation in context
56. [3] Shows understanding of one aspect of automation in context
57. [3] Argument (one-sided) based on the advantages or disadvantages of automation in context
58. [2] Shows knowledge of two aspects of automation
59. [2] Limited analysis of advantages and disadvantages of automation
60. [1] Shows knowledge of one aspect of automation
61. [1] Limited analysis of advantages or disadvantages of automation
62. [0] No creditable content
63. Context/content: • Faulty part made in factory A which uses batch production • Costs of recall may delay change • Effect on employees especially skilled workers • Effects on apprenticeship scheme • Will they be able to meet their social enterprise objectives? • Lower unit costs in factory B • Cost of investment may mean less to invest in employee training • Why the need to reduce unit costs? Social enterprise is already making a good profit, even after recall • Could reduce price, asked by customers, through efficiency savings
64. Examples of how an answer could develop and how it should be annotated. K: Automated machinery is more consistent APP: The company will be able to produce engine parts more quickly AN: This should mean that the average unit cost will fall DEV: Therefore UC could re-invest the extra profits into the company, as a source of finance, and help it achieve its CSR objective. EVAL: To some extent automation could be damaging to UC because of high start-up costs (EVAL) However, I would recommend that UC should automate Factory A (EVAL) as it will have a higher level of consistent output leading to lower average costs and higher profits in the long-run (EVAL)
65. Examples of how an answer could develop and how it should be annotated. K: UC should not automate as it would have high set-up costs APP: The cost of sales are already forecast to rise by $1.1m in 2020 AN: This could mean that UC's profitability will decrease DEV: Consequently, as UC is a private company it cannot sell shares to the public to cover these costs so they may face a cash-flow problem and their liquidity may not be sustainable.