PLK is a social enterprise which offers training to young people who leave school with no qualifications. The young people are trained by PLK chefs to prepare food which is sold at local markets or sporting events. Choosing the right method of promotion is important. The manager of PLK thinks that to increase profit it is better to raise prices rather than use cheaper food ingredients. Table 1: Cost and sales information for PLK Number of meals sold per week | 1000 Price per meal | $3 Variable cost per meal | $2 Fixed costs per week | $300

Mark scheme

Marking points from the official mark scheme (May/June 2019). The mark or mark type is shown in brackets.

1. [2] Clear understanding: e.g. business with both social objectives as well as aim to make a profit
2. OR organisation whose primary / main objective is social (and any profit made is reinvested) [2]
3. Some understanding [1] e.g. not all about profit OR profit is not only objective
4. OR an organisation which has social objectives [1]
5. OR business that aims to help / benefit society [1]
6. [2] Clear understanding: e.g. costs that do not change with output / sales / level of activity
7. OR Costs which have to be paid whether produce any products or not [2]
8. Some understanding [1] e.g. costs that stay the same
9. OR costs that do not change [1]
10. [4] Good application = $700
11. Total revenue: 3 × 1000 = 3000 [1]
12. Total cost = 2300 [2]
13. OR 2 × 1000 = 2000 [1] + FC 300 = 2300 [1]
14. 3000 – 2300 = 700 [4]
15. OR Contribution method: (total) contribution – fixed costs
16. Contribution: (3–2 =) 1 [1]
17. 1 × 1000 [1] = 1000 [+1]
18. Profit = 1000 – 300 = 700 [4]
19. [6] Knowledge [2 × 1] Award 1 mark for each relevant method
20. Application [2 × 1] Award 1 mark for each relevant reference made to this business
21. Analysis [2 × 1] Award 1 mark for each relevant explanation (to show how it would work or why it might be used)
22. Free samples [k] at sports events [app] as by allowing people to try it encourages them to buy it [an]
23. Use loyalty cards / schemes [k] to encourage customers to return many times [an] for meals [app]
24. Advertising or examples such as (local) paper OR radio OR television OR leaflets OR social media (allow only once) [k] to raise awareness / inform / attract potential customers [an] about this social enterprise [app]
25. Sponsorship OR public relations [k] which can help increase its brand image / reputation [an]
26. Competitions [k]
27. Free gifts [k]
28. Use of specific price promotions such as BOGOF, money off coupons or short-term discounts (allow only once) [k] as people able to afford it / willing to buy as its cheaper [an]
29. [6] Knowledge [1] Award max. 1 mark for identification of relevant issue(s)
30. Application [1] Award 1 mark for a relevant reference made to this business
31. Analysis [2] Award up to 2 marks for relevant development of point(s)
32. Evaluation [2] Justified decision made as to whether PLK should increase its prices or use cheaper ingredients.
33. Raise prices
34. could lead to fewer customers (as cannot afford it) [k] resulting in lower revenue [an] of food [app]
35. lower break-even point [k] so need to sell less to cover costs [an]
36. People could be willing to pay higher price as they think it's for a good cause [k] as it's a social enterprise [app]
37. Higher price may suggest better quality [k]
38. Cheaper ingredients
39. will lower the variable cost [k] which will lower total costs / improve profit margin [an]
40. could lower quality [k] damaging reputation [an] leading to fewer sales [an]
41. Other factors can be also discussed such as:
42. whether demand is price elastic or inelastic [k] as if meals are price elastic then an increase in price should lead to lower revenue [an]
43. Level of competition [k]