Fig. 3 is a document sent by K Manufacturing Ltd (KML), a manufacturer of sweets that deals directly with many retail stores, to D Stores, an independent sweet shop. [Figure 3 shows a Statement of Account with Date, Transaction Summary, Debit $, Credit $, Balance $ columns and several rows of data.]

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2017). The mark or mark type is shown in brackets.

1. [1] Statement of Account
2. [2] $330 + $200 (1) = $530 (1) or 2 marks for the correct answer
3. [3] The entry is a credit note (1) which has the effect of crediting the account of D stores (1) and thus reducing the amount that D Stores owes KML (1) A credit note (1) can be used when D Stores return goods (1), e.g. faulty/damaged goods (1) A credit note (1) can also be used if a delivery from KML to D was short / less goods were delivered than were ordered (1) A credit note (1) issued for $30 (1) due to an overcharge (1)
4. [6] Level 2 (4-6 marks) Has discussed whether or not KML should sell exclusively to W Wholesale and given reasoning Level 1 (1-3 marks) Has commented on the statement If a candidate has presented a one-sided argument, award 4 marks max. Advantages: KML will not have to employ its own sales force but can now rely on W Wholesale's sales force, and will therefore reduce its wage costs KML will only have to deliver to W Wholesale, which will reduce transport costs KML can deliver in bulk to W Wholesale and rely on W Wholesale breaking bulk W Wholesale can provide storage, thus reducing the need for storage at KML's premises As long as W Wholesale is credit-worthy then the risk of bad debts will be reduced Disadvantages: The price to W Wholesale will be lower than the former price to KML, thus reducing the gross profit of KML The relationship with the retail customers will be lost, and KML will therefore lose a valuable way of understanding changes in the market The sales force of W Wholesale will not be exclusively selling KML's products, therefore there may be sales lost to competitors KML may feel uncomfortable with its over-reliance on W Wholesale Decision: The savings in wages and transport costs must be weighed against the lower gross profit. If the savings are less than the reduction in gross profit, then this indicates that KML should reject W Wholesale's approach Even if the figures are indicating that KML should switch to W Wholesale, KML must be satisfied that its present customers are going to continue to buy KML's products through W Wholesale KML must have no doubts about the credit-worthiness of W Wholesale and of the competence of its sales force
5. [4] W Wholesale will use the warehouses to break bulk (1) and store the goods (1) bought from the manufacturers (1) before delivering them to its customers (1) allows inspection by buyers (1) The warehouse will protect goods (1) from weather/theft/damage (1) The warehouse balances out supply and demand (1); will act as a stockpile for out of season goods (1) until they are needed again (1); stabilise prices (1); release goods when there are shortages (1) Some warehouses offer special facilities (1): refrigeration (1) for perishable goods (1), seasonal goods (1) To enable manufacturers to make goods ahead of demand (1), package/weigh/process goods (1) so that they have space for production (1) Yes/generally warehousing is essential to W Wholesale (1)
6. [4] The secondary sector is where products are made (1) and relies on the secondary sector to distribute the products (1) The aids to trade, such as banking and warehousing, are found in the tertiary sector (1) but are essential to the secondary sector (1) Without the secondary sector making the goods (1) the tertiary sector would have no goods to distribute/sell (1)