Drools Ltd manufactures and packages chocolates. The company sells to many different customers.

Mark scheme

Marking points from the official mark scheme (May/June 2015). The mark or mark type is shown in brackets.

1. [3] (a) Any three points × 1 mark each or one well developed point × 2 marks
2. it enables the brand to be put on the product with particular brands regarded as more expensive than others
3. it makes the product look more expensive than it is – coloured box/purple/gold wrapping
4. it makes the product seem bigger than it is and so more money can be charged
5. it makes the product recognisable and so attracts the attention of buyers
6. it keeps it fresher for longer
7. any other relevant point
8. [4] (b) Any four points × 1 mark each and up to 2 marks for a well-developed point including examples
9. enables Drools Ltd to communicate with many parts of the world using email
10. enables Drools Ltd to advertise using the Internet which can be seen by customers worldwide
11. enables orders to be placed efficiently and accurately using email, online
12. enables printed catalogues to be sent to potential buyers so that orders can be placed
13. enables complaints to be dealt with quickly and efficiently
14. enables new products to be displayed to a wide market
15. enables Drools Ltd to expand its market
16. enables delivery dates to be checked
17. allow advertising
18. allow comments on web sales direct to final consumer
19. any other relevant point
20. [4] (c)(i) Any four reasons × 1 mark each and up to 2 marks for a well-developed point
21. so that it targets a wide market
22. the chocolates have a wide market
23. the three advertising media are all examples of mass media
24. all three media are likely to be successful
25. they all show visual images
26. the advertisements can all be shown in colour
27. details about the chocolates can be given in magazine and newspaper advertising
28. Drools Ltd is likely to be able to afford these media
29. comments on socio-economic groups
30. any other relevant point
31. N.B. allow an alternative approach – consideration of each individual medium × 1 mark each
32. [1] (c)(ii) Any one advertising device in context × 1 mark – luxury, wealth, affluence, nostalgia, romance, status, colour, love, food.
33. any other appropriate device
34. [2] (d)(i) current assets – current liabilities = 2 marks
35. capital used for the day to day running of the business + example = 2 marks
36. [6] (d)(ii) Level 2 (4–6 marks) Has discussed each option and recommended, with reasons, a suitable course of action.
37. (If a candidate has not discussed all the options/given no recommendation – 4 marks max)
38. Drools should consider some of these options.
39. If it asks customers to pay as soon as possible, this will increase its cash and so increase its current assets. It will probably have to offer some incentives to persuade customers to do this such as cash discount and so its cash receipts will not be as great. Some customers may be unable to take advantage of any cash discount offered.
40. The question implies that Drools Ltd already has an overdraft which is a current liability. If it asks the bank to increase its overdraft, the bank may refuse. The overdraft will give flexible cash but will also increase the cost of credit.
41. It may be possible to negotiate longer periods of trade credit with suppliers. It will depend on how long Drools Ltd already has and its creditworthiness. If it is able to do this, it will be able to postpone paying its creditors until it receives payments from debtors to fund its bills.
42. I would recommend trying to get customers to pay more quickly and at the same time, trying to extend the period of trade credit with suppliers.
43. Level 1 (1-3 marks) Has commented on one or more of the options with/without a recommendation.
44. Drools Ltd should ask its customers to pay more quickly. They may refuse. It should ask Its suppliers if it can pay later. This would help Drools Ltd. It should not borrow money. It will have to pay interest.
45. N.B. If candidate states that options do not improve the working capital with reasons – Level 2 response – reasons are that options only move assets and liabilities within the working capital total.