Pop-up Movies (PM) PM is a private limited company that was set up five years ago. PM shows movies outdoors at night. The movies are projected onto a large screen and temporary seating is provided for the audience. PM hires a venue and then sells tickets. The screen is set up for three nights at each venue. It takes three employees one day to set up the screen and seating, and one day to take it down again. PM uses above the line promotion methods locally for six weeks before showing movies at each venue. Table 1.1 contains data about some of PM's previous events. Table 1.1: Data about some of PM's previous events: Venue A: Number of customers = 1050, Allocated fixed costs = $2000, Variable costs (per customer) = $4, Revenue (per customer) = $15. Venue B: Number of customers = 600, Allocated fixed costs = $2000, Variable costs (per customer) = $5, Revenue (per customer) = $19. Venue C: Number of customers = 980, Allocated fixed costs = $2000, Variable costs (per customer) = $4, Revenue (per customer) = $15. At each event, PM employs a team of 20 customer service workers to: • show customers to their seats • sell food and drink – PM sells drinks, popcorn and other snacks • assist with parking for those customers who arrive by car (valet parking). The Operations Director has suggested that PM should book larger venues. He thinks that PM would experience economies of scale by doing this.

Mark scheme

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

1. Knowledge
2. [2] A correct definition
3. [1] A partial, vague or unfocused definition
4. [0] No creditable content
5. A correct definition should include the following elements:
6. • the income received by a business
7. • for selling products and services.
8. Exemplar
9. Rationale
10. Marks
11. Selling price × quantity sold; Both elements; [2]
12. The money received by a business from selling goods; Both elements; [2]
13. Income from sales; Both elements; [2]
14. Total value of all sales; Both elements; [2]
15. Money earned due to the payment of price from the customer; One element; [1]
16. The cash received by a business; One element; [1]
17. What a business has to pay to produce goods and services; Confusion with costs; [0]
18. Award one mark for each point of explanation:
19. [1] C Example or some other way of showing good understanding
20. [1] B Through a media/paid for
21. [1] A Communication/advertising/creating awareness to consumers/customers
22. Note: Do not award C mark unless A and B marks have been awarded.
23. Content
24. Above the line promotion is the use of media to promote a business and reach out to the target consumers.
25. These include conventional media, television and radio advertising, print as well as internet. This is communication that is targeted to a wider spread of audience and is not specific to individual consumers.
26. Exemplar
27. Rationale
28. Marks
29. Above the line promotion is where a business advertises (A) using media (B) such as television (C); All three elements; [3]
30. When a business pays another business (B) to communicate (A) about its services, for example when Coke pays a radio station to play an advert (C); All three elements; [3]
31. Tv advertising; A and B; [2]
32. ATL promotion is a form of communication (A) between the business and the consumer, for example a billboard; A only - do not award the C mark unless B has been awarded; [1]
33. Above the line promotion is when an employee is promoted from within the business; Confusion with promotion in employment; [0]
34. Rationale
35. Marks
36. [3] Correct answer with or without correct working or units
37. [2] Correct calculation of contribution
38. [1] Formula
39. [0] No creditable content
40. Content
41. Fixed Costs / Price – VC per unit (contribution)
42. ($2000 / ($19 - $5)) = $2000 / $14 = 142.9
43. Answer = 143 customers (3) allow 142.88, 142.9 OFR
44. Common incorrect answers
45. Answer
46. Mark
47. Rationale
48. 143; Correct answer; [3]
49. 2000/14 = 142; Incorrect final answer; [2]
50. BE = fixed cost/contribution; Formula only; [1]
51. 142 (no working); [0]
52. Level 2b (APP): [3] Explanation of one way a business can use break even data in context
53. Level 2a (K+K): [2] Explanation of one way a business can use break even data
54. Level 1 (K): [1] Identification of way a business can use break even data
55. Level 0: [0] No creditable content
56. Note: OFR from answer to Q1(b)(i)
57. Content
58. • Shows how many customers are needed at each venue (venue B = 143 OFR) so that PM can start making a profit from each venue.
59. • Helps PM to see which venues are likely to be most profitable (venue B is most profitable).
60. • Shows PM the likely margin of safety for future venues (venue B MOS = 457 OFR).
61. • PM can model different prices for different venues and make sure a minimum level of profit is gained.
62. ARA Exemplar
63. Rationale
64. Mark
65. Helps in business decision making (k) to see which shows and movies (app) are most popular (kk); All three elements seen; [3]
66. Calculates (Shows) the income/revenue needed to make a profit (k) to check the financial health of the business (kk); No application; [2]
67. Reach a point where they don't lose money; Minimum requirements for break even; [1]
68. Knowledge and Application (4 marks) Level 2b: [4] Shows understanding of two advantages of training in context
69. Knowledge and Application (4 marks) Level 2a: [3] Shows understanding of one advantage of training in context
70. Knowledge and Application (4 marks) Level 1b: [2] Shows knowledge of two advantages of training
71. Knowledge and Application (4 marks) Level 1a: [1] Shows knowledge one advantage of training
72. Knowledge and Application (4 marks) Level 0: [0] No creditable content
73. Analysis (4 marks) Level 2b: [4] Developed analysis of two advantages of training in context
74. Analysis (4 marks) Level 2a: [3] Developed analysis of one advantage of training in context
75. Analysis (4 marks) Level 1b: [2] Limited analysis of two advantages of training
76. Analysis (4 marks) Level 1a: [1] Limited analysis of one advantage of training
77. Analysis (4 marks) Level 0: [0] No creditable content
78. Content: Training is the action of improving an employee's knowledge and/or skills.
79. Indicative content A01 Knowledge and understanding: Knowledge of training may include:
80. • Increase productivity
81. • Improve customer service
82. • Motivate the workers
83. • reduce customer complaints
84. • reduce damages
85. • Improve communication
86. AO2 Application: Application may include:
87. • show customers to their seats – workers will need to know the seating configuration, where each seat is.
88. • sell food and drink – PM sells soft drinks, popcorn and other snacks
89. • assist with parking for those customers who bring a car (valet parking)
90. • workers may need training on driving customer cars, customer service training etc.
91. AO3 Analysis: Analysis may include:
92. • Increased productivity – (increase the sales of food and drink, park customer cars quicker/more efficiently) – may increase revenue.
93. • Increase customer satisfaction – repeat purchases etc.
94. • increase employee satisfaction – decrease staff turnover.
95. • Reduce customer complaints – decrease costs/increase customer retention.
96. • Reduce damages – decrease costs.
97. • Improve communication – decrease speed of set up and take down (of screen and seating).
98. ARA Examples of how an answer could develop and how it should be annotated.
99. K: Can be more efficient; APP: When selling food and drink; AN: Avoids people waiting for a long time; DEV: So they will be more satisfied
100. K: Can motivate workers; APP: In charge of valet parking; AN: Will offer an excellent service; DEV: And increase the brand reputation
101. Knowledge and Application (4 marks) Level 4: [4] Shows understanding of two economies of scale in context
102. Knowledge and Application (4 marks) Level 3: [3] Shows understanding of one economy of scale in context
103. Knowledge and Application (4 marks) Level 2: [2] Knowledge of two economies of scale
104. Knowledge and Application (4 marks) Level 1: [1] Shows knowledge of one economy of scale
105. Knowledge and Application (4 marks) Level 0: [0] No creditable content
106. Analysis and Evaluation (7 marks) Level 7: [7] Justified evaluation based on arguments in context
107. Analysis and Evaluation (7 marks) Level 6: [6] Developed evaluation based on arguments in context
108. Analysis and Evaluation (7 marks) Level 5: [5] An evaluative statement based on arguments in context
109. Analysis and Evaluation (7 marks) Level 4: [4] Arguments based on two economies of scale in context
110. Analysis and Evaluation (7 marks) Level 3: [3] Argument based on one economy of scale in context
111. Analysis and Evaluation (7 marks) Level 2: [2] Limited analysis of two economies of scale
112. Analysis and Evaluation (7 marks) Level 1: [1] Limited analysis of one economy of scale
113. Analysis and Evaluation (7 marks) Level 0: [0] No creditable content
114. Indicative content: AO1 knowledge and understanding: Knowledge of economies of scale may include:
115. • Internal economies of scale: purchasing, marketing, financial, technical, managerial/specialist, risk-bearing.
116. • External economies of scale: concentration, infrastructure.
117. Note: describing an EoS is allowable as Knowledge
118. AO2 Application: Application may include:
119. • Moving to larger venues – more seats
120. • Films projected on to big screen.
121. • Temporary contracts for 20 employees at each venue – may need more workers.
122. • Transportation of consumables (food and drink).
123. • Set up and take down of the screen (a day for each).
124. • Six weeks above the line promotion before each venue.
125. AO3 Analysis: Analysis may include:
126. • Purchasing - able to bulk buy consumables for a venue which may reduce unit cost of these items – increase profitability (assuming same price) or decreased price – increased sales/competitiveness.
127. • Marketing - ATL promotion can be spread over larger venue – reduce average costs – profitability – however will the length and amount of promotion need to be increased for ten times the length of time at a venue?
128. • Financial - limited context – increased venue may lead to a larger business and therefore lower average finance costs.
129. • Technical – may be able to afford a better projector or screen reducing average costs. May be able to afford more recent films?
130. • Managerial/specialist – can employ workers for a longer time period – training spread over more customers, can afford to employ better salespeople (food and drink), valet parkers, better customer service.
131. • Risk-bearing - costs spread over a larger number of customers – however spread over less venues – the wrong venue might increase risk.
132. AO4 Evaluation: Evaluation may include:
133. • A judgement over the economies of scale.
134. • Evaluation of the relative impact of different economies of scale.
135. • Elements that the evaluation/judgement might depend upon – local competitors, the chosen venue(s), workers available in the area, length of time needed to market before longer event, availability of larger venues, demand etc.
136. ARA Examples of how an answer could develop and how it should be annotated.
137. K: internal; APP: Purchasing bulk products for the food stand; AN: Reduces unit cost of item; DEV: Increases profit margins; EVAL: The economies of scale will be mostly beneficial for PM
138. K: Risk bearing; APP: As allocated fixed costs remain static at $2000; AN: Increases margin of safety over 143 BE point; DEV: However can reduce atmosphere if larger venues are empty; EVAL: Likely to increase overall profits However depends upon whether marketing is successful and the film choice is suitable for the audience