Fig. 3 gives details of costs and possible profits on a tube of toothpaste. [Figure 3.0] Use the information given in Fig. 3 to help you to answer the following questions.

Mark scheme

Marking points from the official mark scheme (May/June 2013). The mark or mark type is shown in brackets.

1. [2] (a) 30c + 40c + 30c (1) = $1 (1) OFR applies If a candidate gives the correct answer without working, award full marks.
2. [4] (b) Any four points × 1 mark each or two well explained points × 2 marks each –
3. the supermarket buys in very large quantities
4. directly from the manufacturer
5. and obtains discounts for bulk buying/better trade discounts
6. some of which is passed on to the consumer
7. the supermarket sells very large quantities of toothpaste
8. so it makes up its profit by volume sales
9. has lots of customers
10. used as loss leader
11. using lower cost selling methods e.g. self service
12. any other relevant point
13. [2] (c) (i) 80 000 × 30c (1) = $24 000 (1) OFR applies (NB answer can be in cents) If a candidate gives the correct answer without working, award full marks.
14. [2] (c) (ii) Any two points × 1 mark or one well explained point × 2 marks –
15. distribution involves several enterprises
16. distribution covers the costs of packaging, warehousing and transport
17. transport costs are expensive as the toothpaste has to be distributed to many different outlets such as wholesalers, chemists, supermarket distribution centres
18. the manufacturer will be using mass production techniques in the manufacture of toothpaste and so can cut costs by division of labour/more mechanisation
19. any other relevant reason
20. [4] (d) Any four points × 1 mark or two points explained × 2 marks –
21. advertising material such as the brand name is placed on the packaging
22. the packaged toothpaste will be shown using some advertising media to inform and persuade consumers to buy the toothpaste
23. the packaging may contain details of special promotions to sell the toothpaste
24. the packaging is made attractive e.g. coloured packaging to increase the appeal of the toothpaste and so assist the advertising
25. any other relevant point
26. [6] (e) Level 2 (4-6 marks) Has discussed the advertising media available and has recommended one or more advertising media with reasons. (If a candidate has discussed only one advertising medium, award 4 marks max.) The manufacturer of toothpaste is likely to use a variety of advertising media to introduce the toothpaste to the market. The manufacturer may use trade magazines to show the trade the new product in order to sell bulk quantities to the retail trade. The manufacturer is likely to use mass media to advertise the toothpaste. He will have a large advertising budget so can afford to advertise on television where a person showing very white teeth is likely to make an impact. Billboards placed at the sides of roads are likely to make an impact as colour can be used and the pictures can be displayed on a large scale. Although the manufacturer may have a website to show the range of products offered, a new kind of toothpaste is not likely to be the most popular product that people surfing the net will look at. The Internet will be useful if a worldwide audience is required and detailed information can also be given. People are unlikely to buy quantities of toothpaste online. The toothpaste manufacturer is unlikely to use leaflets to any great extent except as an insert inside the packaging. Leaflets are a kind of more localised advertising and, although cheap, would not be very effective. I would recommend that the manufacturer uses mass media advertising such as television and billboards in order to sell in large quantities and also uses trade magazines to introduce the toothpaste to wholesalers and retailers. Level 1 (1-3 marks) The manufacturer should use television advertising. It has a very large audience. Adverts can be shown in colour. The manufacturer can afford the high costs. The manufacturer might also use the Internet. It is cheap advertising. The adverts can be changed easily.