BBB is a manufacturer of kitchen tools. It sells online and to speciality stores in the home market.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2016). The mark or mark type is shown in brackets.

1. [4] (a) (i) Up to 2 marks for each advantage explained to a maximum of two advantages (Any 2 x 2 marks (1 + 1 marks))
2. • Selling online will open up a very large market/more customers (1) in his home country/overseas (1) more profit (1)
3. • Payment will be made by debit/credit card (1) when placing the order so BBB will be paid quickly (1) no bad debts (1)
4. • BBB is cutting out the middleman in the speciality store (1) so will make higher profits/lower his costs (1), e.g. of lower costs such as less labour (1)
5. • Many people use the internet (1) so that goods will be more known (1)
6. Accept any other relevant points.
7. [1] (ii) 1 mark for a definition
8. • A speciality store is a shop that carries a limited number of stock items/one type of goods (1) that are all connected to a theme (1) catering for a particular market (1)
9. Note: No mark for an example.
10. Accept any other relevant points.
11. [2] (b) (i) Valid points include (Any 2 × 1 marks)
12. • The rate of stock turnover is number of times (1) new stock is bought/replaced/sold (1) accept formula (1) It provides the business with a measure of how quickly stock is sold (1) over a period of time (1)
13. Accept any other relevant points.
14. [3] (ii) One mark for making a decision and any 2 × 1 marks
15. • Yes (1) as it shows how busy the business is (1) and has an impact on the amount of working capital that a business will need (1) as a business with a low rate of turnover will need a greater working capital (1)
16. • The longer goods remain in the business, the greater the risk of damage/wastage (1) BBB will not want obsolete stock (1) and the rate of stock turnover will decrease if there is a lot of obsolete stock (1) which he should identify and sell at a discount (1)
17. • While a high rate of stock turnover is generally good (1) BBB must ensure that they have enough stock to fill orders as they are taken (1) as customers may not wait for long periods while tools are manufactured (1)
18. • BBB must try to balance the rate of stock turnover between these two needs (1)
19. Accept any other relevant points.
20. [6] (c) (i) Level 2 (4–6 marks) Has discussed whether or not BBB should export its kitchen tools and has given a reasoned opinion (If a candidate has presented a one-sided argument, award 4 marks max.)
21. Level 1 (1-3 marks) Has commented on exporting with/without a decision
22. Advantages
23. • Exports will increase sales revenue and ultimately profits.
24. • The government will encourage exports to improve the country's balance of payments or balance of trade.
25. Disadvantages
26. • Products may have to be redesigned to meet the consumers' needs in a different country.
27. • More complicated documentation is needed and the method of payment will be different.
28. Decision
29. • The extra costs of exporting have to be balanced against the extra sales revenue generated.
30. • BBB will usually be encouraged to export their tools as long as some market research has been completed in the recipient country. This will ensure that a market exists for their tools at the prices they will have to charge.
31. Accept any other relevant points.
32. [4] (ii) 1 mark for stating a function of customs authorities and 1 mark for an explanation of that function up to a maximum of two functions (Any 2 × 2 (1 + 1 marks))
33. • The customs authorities of BBB's country keep records of all exports (1) and BBB will have to supply them with detailed lists/prices (1)
34. • The customs authorities of the country BBB is exporting to will apply the import duties (1) increasing BBB's costs (1)
35. • They will also check to ensure that import quotas (1) are not being exceeded which may mean BBB could be affected on the number of goods that it can export (1)
36. • Will have to present additional documents (1), e.g. bill of lading (1)
37. • Goods may be placed/kept/stored in bonded warehouses (1) where dutiable goods will be stored (1)
38. • Will check that there is no smuggling (1) of illegal/banned goods (1)
39. Accept any other relevant points.