A wholesaler sells to many retailers. These retail customers are offered trade credit and trade discount by the wholesaler.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2012). The mark or mark type is shown in brackets.

1. [2] (a) Any two services x 1 mark each - providing goods in the quantities they require, breaking bulk, cash and carry, delivery, storage, display of goods, providing a variety of goods, saving time travelling to different suppliers, any other relevant service
2. [3] (b) Any three points x 1 mark each to show the difference NB must have commented on both trade credit and trade discount. trade credit is credit given to customers by a trader, enabling them to buy now and pay later, and to sell the goods before they have to pay for them, may assist the buyer's cash flow/working capital, trade discount is a reduction given between traders, to encourage bulk buying, and repeat orders, enables the retailers to make a profit, may be variable according to the amount bought/individual trader, any other relevant point
3. [1] (c) (i) order form
4. [1] (c) (ii) credit note
5. [1] (c) (iii) statement of account
6. [3] (d) (i) entitled to trade discount of 20% of $4000 = $800, $4000-$800 = 3200, but not entitled to cash discount of 5% (160) as she did not pay within the 30 days, as no cash discount is allowed as paid after the 30 days allowed (1 mark)
7. [3] (d) (ii) Any three actions x 1 mark each - contact the wholesaler, showing any documents involved e.g. invoice, ask for a credit note, or replacement biscuits, ask for better quality products in future, any other relevant action sue/go to police/consumer protection agency = 0 marks
8. [6] (e) Level 2 (4-6 marks) Has discussed the issue of selling both to retailers and to consumers and has given a reasoned answer. If a candidate has discussed selling to consumers without mentioning also selling to retailers, award 4 marks max. Wholesalers are facing competition from large-scale retailers. They have always sold to retailers especially small-scale retailers. In order to widen their customer base they need to sell as widely as possible. One way of doing this is to sell directly to consumers who gain the benefit of bulk buying and lower prices. This may mean more sales and so greater profits for the wholesaler. The wholesaler may be offering cash and carry services and these services would also appeal to consumers. However, it is possible that the wholesaler's retail customers may not like card-carrying consumers buying directly and obtaining the same services. They may regard these consumers as their customers and so the wholesaler becomes a threat to their businesses. They may find the wholesaler's warehouse crowded when they visit so it is difficult for them to obtain their goods. They may find the warehouse geared to the needs of consumers e.g. selling in small quantities, rather than to their needs. By limiting the number of consumers allowed to use the wholesaler's facilities to card holders, the wholesaler is controlling the amount of business done directly with consumes. The bulk of the business is likely to be with retailers and these must be more important customers for the wholesaler than the direct sales to consumers. Level 1 (1-3 marks) Has commented on the issue with/without an opinion. Wholesalers usually sell to retailers. They have a cash and carry warehouse. They could also sell to consumers who like cheap prices. They will earn more profits if they sell to both retailers and to consumers.