AG Services is a company specialising in refuse collection and recycling.

Mark scheme

Marking points from the official mark scheme (May/June 2011). The mark or mark type is shown in brackets.

1. [2] (a) (i) Any two points × 1 mark each: to deposit money that is not needed at present; so that it can earn interest; and be readily available; when required for investment/expansion/replacement of machines. Any other relevant point.
2. [2] (a) (ii) Any two payment methods × 1 mark each: cheque, credit transfer/bank giro, direct debit, standing order/banker's order, bank draft, credit card, debit card, electronic transfer, withdraw cash.
3. [6] (b) Level 2 (4-6 marks) Candidate has discussed both options and has given a reasoned recommendation. (If a candidate has discussed only one option award 4 marks max.) (If a candidate has made no recommendation = 5 marks max.) AG Services might purchase the trucks if it has sufficient funds available and if these funds are not needed for another project. The company will not have to pay interest, may be able to negotiate good terms and the trucks would become assets of the company. The company would, however, have to pay for the repairs and maintenance of these trucks and also insure them. This would all add to the costs of running these trucks. AG Services might also consider leasing the trucks if suitable trucks are available. It might do this if it was uncertain about how many trucks it might need in the future. If the company leases the trucks it would probably enter into a repair and maintenance contract. The company would not own the trucks but only rent them but it might be able to replace them after about two years so that the business is using up-to-date vehicles. It would, however, probably pay more overall to lease than if it were to purchase outright but it would spread the payments for using the trucks. I would recommend that AG Services buy the trucks if it has sufficient funds to do so. Then it has complete control over what the trucks may be used for and how they are to be repaired and maintained. (NB beware of comment on hire purchase and credit sales.) Level 1 (1-3 marks) Candidate has commented on one or both options with/without a recommendation. If AG Services bought the trucks they would own them. If they leased them, they would rent them and would not own them. It would be able to pay gradually. I recommend leasing them.
4. [2] (c) (i) Any two reasons × 1 mark for each: because it covers claims by employees; because of accidents at work/example; as a result of the employer's negligence; required by law; pay compensation/otherwise pay from own reserves.
5. [2] (c) (ii) Any two reasons × 1 mark for each: because it covers claims by members of the public/customers; because of the company's negligence; example – customer falling on a slippery floor; may involve the payment of large amounts of compensation; pay compensation/otherwise pay from own reserves.
6. [2] (c) (iii) Any two reasons × 1 mark for each: because it owns trucks; third party required by law; the trucks are expensive to replace; may have comprehensive insurance; may have fleet insurance to cover all the vehicles; pay compensation to third party; pay compensation/otherwise pay from own reserves. Any other relevant point.
7. [4] (d) Any four points × 1 mark each: the insurance company would inspect the building; and use assessors to negotiate the claim settlement; the insurance company would pay out $15m if the building was totally destroyed; because the building has been over-insured; although A & G Services have paid premiums for $17m cover; it can only be indemnified/paid the value of the building; it cannot make a profit from a loss. Any other relevant point. NB utmost good faith = 0 marks.