Benjamin's Beds (BB) Benjamin's Beds (BB) is a large manufacturer of beds and has a strong brand image for quality. Its main channel of distribution is through the producer market (B2B) to national hotel chains. Recently, BB has also entered the consumer market (B2C) by selling online direct to customers. BB uses flow production. BB's existing machinery is old and cannot satisfy the increased demand. The directors of BB have decided its existing machinery needs replacing. Table 2.1 shows data for existing and proposed new machinery. Table 2.1 Data for existing and proposed new machinery Variable cost per unit ($) Output per year Existing machinery 50 5000 New machinery 40 7500 Fixed costs are $500000 per year. Using new machinery would reduce this by 10%. BB sales data suggests that its market share is growing rapidly. The consumer market (B2C) is becoming more important to BB because online orders are increasing. However, online demand is for a wide range of bed styles. The consumer market requires a substantial marketing budget and some retraining of employees. Orders from national hotel chains in the producer market (B2B) are for a more limited range of bed styles. These orders remain constant with low marketing costs. However, BB is increasingly under pressure to reduce prices to hotels. BB uses non-financial motivators and until recently had a motivated workforce. Efficiency is falling due to employees having to work longer hours because of increased demand. This is decreasing staff morale and welfare.

Mark scheme

Marking points from the official mark scheme (Feb/Mar 2022). 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. Content: One mark for a portion/section of a market (or comparison with other businesses / whole market)
5. Content: One mark for controlled by a business or product
6. Content: The section of a market (1) controlled by a business. (1)
7. Content: Allow formula (sales of business / sales in market X 100) for 2 marks – either expressed as a formula or in words.
8. Accept any reasonable answer
9. Award one mark for each point of explanation:
10. [1] C: Example or some other way of showing good understanding
11. [1] B: Understanding that it leads to the highest amount of outputs
12. [1] A: Understanding of the concept of least amount of inputs
13. C marks dependent on A and B mark being present
14. Content: The least amount of inputs (1) to make the maximum output (1) to reduce waste (1)
15. Accept any reasonable answer
16. [3] Correct answer, with or without working and $ sign
17. [2] Attempt to calculate with correct figures / correct calculation of TVC (300 000) and TFC (450000)
18. [1] Formula/ correct calculation of TVC (300 000) or TFC (450 000)
19. [0] No creditable content
20. Content: Total variable costs + fixed costs [1 mark]
21. Content: (40 × 7500) + (500 000 × 0.9) [2 marks]
22. Content: Answer = ($)750 000 [3 marks]
23. Common incorrect answers: 750 000 [3]
24. Common incorrect answers: 300 000 + 500 000 = 800 000 [2]
25. Common incorrect answers: $800 000 (no working) [0]
26. Common incorrect answers: $250 000 + $450 000 = $700 000 [2]
27. [3] Explains one possible limitation to BB of using the proposed new machinery (2a App)
28. [2] Explains one possible limitation of using new machinery with no application to BB (1b K+K)
29. [1] Identifies one or more possible limitation of using new machinery with no application to BB (1a K)
30. [0] No creditable content (0)
31. A01 Knowledge and understanding: Limitations may include: Capital cost - opportunity cost of spending in other areas
32. A01 Knowledge and understanding: Retraining - may reduce cashflow / increase costs
33. A01 Knowledge and understanding: Space requirements – may require a new factory /extension
34. A01 Knowledge and understanding: Risk - compared to 'known' machinery
35. AO2 Application: BB has a reputation for quality
36. AO2 Application: Beds - large product (large machinery)
37. AO2 Application: Use of Table 2.1 (in comparison to increased costs)
38. AO2 Application: Market is growing rapidly
39. AO2 Application: Wide range of consumer (online) styles required
40. AO2 Application: Decreasing staff morale and welfare.
41. Accept any reasonable answer
42. [4] Shows knowledge of two disadvantages of decreased morale and welfare in context (2b K+A)
43. [4] Developed analysis of two disadvantages of decreased staff morale and welfare in context (2b Analysis)
44. [4] Shows knowledge of one disadvantage of decreased morale and welfare in context (2a K+A)
45. [3] Developed analysis of one disadvantage of decreased staff morale and welfare in context (2a Analysis)
46. [2] Shows knowledge of two disadvantages of decreased morale and welfare (1b K+A)
47. [2] Limited analysis of two disadvantages of decreased morale and welfare (1b Analysis)
48. [1] Shows knowledge of one disadvantage of decreased morale and welfare (1a K+A)
49. [1] Limited analysis of one disadvantage of decreased staff morale and welfare (1a Analysis)
50. [0] No creditable content (0)
51. A01 Knowledge and understanding: Knowledge of morale – the confidence, enthusiasm, and discipline of a person or group at a particular time.
52. A01 Knowledge and understanding: Knowledge of welfare – a working environment that's healthy and safe for everyone in the workplace.
53. A01 Knowledge and understanding: Disadvantages could include: Increased labour turnover
54. A01 Knowledge and understanding: Increased recruitment costs
55. A01 Knowledge and understanding: Increased training costs
56. A01 Knowledge and understanding: Decreased efficiency
57. A01 Knowledge and understanding: Increased trade union action.
58. AO2 Application: Large manufacturer of beds.
59. AO2 Application: Strong brand image for quality.
60. AO2 Application: Main distribution channel is B2B, but entering the B2C market (becoming more important as online orders are increasing).
61. AO2 Application: Old machinery currently used, but proposition to introduce new machinery (at a cost).
62. AO2 Application: Increased demand in the market – market is growing rapidly.
63. AO2 Application: Increased demand (online) for a wider range of styles – requires retraining.
64. AO2 Application: Pressure to reduce prices (and costs).
65. AO2 Application: BB uses non-financial motivators.
66. AO2 Application: Motivation was good until recently.
67. AO2 Application: Efficiency is falling – long hours due to increased demand (but no financial compensation?).
68. AO3 Analysis: Increased labour turnover; increase in BB's recruitment costs – may mean that producing beds for the online market, where profit margins are lower, is unprofitable.
69. AO3 Analysis: Increased recruitment costs; increase in BB's FC's – may reduce the impact of the 10% saving of the new machinery and make the business unprofitable.
70. AO3 Analysis: Increased training costs; lowers the ability of BB to compete in the online market – BB cannot take advantage of this growing market.
71. AO3 Analysis: Decreased efficiency; less beds being produced – may mean that BB cannot match the demands of the growing online market and lose market share.
72. AO3 Analysis: Increased trade union action; may lead to industrial action – reduce productivity so that BB cannot produce enough to meet the online demand and sales fall.
73. Accept any reasonable answer
74. [7] A justified recommendation based on arguments
75. [6] A developed recommendation based on developed arguments
76. [5] A basic recommendation based on developed arguments
77. [4] Argument based on focusing on both markets in context
78. [3] Argument based on focusing on one market in context
79. [4] Applies context to knowledge of consumer (B2C) and producer (B2B) market
80. [3] Applies context to knowledge of consumer (B2C) or producer (B2B) market
81. [2] Knowledge of consumer (B2C) and producer (B2B) market
82. [1] Knowledge of consumer (B2C) or producer (B2B) market
83. [0] No creditable content
84. A01 Knowledge and understanding: Knowledge of the consumer market (B2C), including: Purchased by the end-user
85. A01 Knowledge and understanding: Direct sales to consumers and through retailers and online
86. A01 Knowledge and understanding: Importance of brand in a competitive market
87. A01 Knowledge and understanding: Sales are likely to be single units.
88. A01 Knowledge and understanding: Knowledge of the producer market, including: Purchased by a business who uses the product to produce another product/service
89. A01 Knowledge and understanding: Direct sales to another business, unlikely to be through retailers
90. A01 Knowledge and understanding: Importance of price, added value and durability
91. A01 Knowledge and understanding: Sales are likely to be for multiple units.
92. AO2 Application: Large manufacturer of beds.
93. AO2 Application: Strong brand image for quality.
94. AO2 Application: Main distribution channel is B2B, but entering the B2C market (becoming more important as online orders are increasing).
95. AO2 Application: Old machinery currently used, but proposition to introduce new machinery (at a cost).
96. AO2 Application: Increased demand in the market – B2C market is growing rapidly.
97. AO2 Application: Increased demand (online) for a wider range of styles in B2C market – requires retraining and substantial marketing costs.
98. AO2 Application: Pressure to reduce prices (and costs) in B2B market.
99. AO2 Application: Limited range of styles in B2B market.
100. AO2 Application: Demand in B2B market is constant with low marketing costs.
101. AO2 Application: BB uses non-financial motivators.
102. AO2 Application: Motivation was good until recently.
103. AO2 Application: Efficiency is falling.
104. AO3 Analysis: For B2C: B2C online sales increasing
105. AO3 Analysis: Hotels want to reduce prices
106. AO3 Analysis: No increase in demand from hotels
107. AO3 Analysis: For B2B: A constant demand from hotels aids planning
108. AO3 Analysis: Less marketing needed for hotels
109. AO3 Analysis: Limited bed range may increase production as less downtime needed for repurposing machines
110. AO4 Evaluation: A recommendation about a whether RR should focus on the consumer (B2C) or producer (B2B) market.
111. AO4 Evaluation: A judgement over the relative suitability of each market.
112. AO4 Evaluation: Elements that the recommendation/judgement could depend upon.
113. AO4 Evaluation: Weighing up of the impacts on choosing a market.
114. AO4 Evaluation: Weighing up of the likely advantages/disadvantages of each market.
115. Accept any reasonable answer