NPX is an online retail business. All orders are sent directly to customers from its warehouse. NPX employs 60 full-time workers. The Operations Manager is analysing NPX's cash-flow forecast. An extract is shown in Table 2.1. To improve productivity, the manager plans to introduce new technology that can select and pack all the items for each order. This will make 35 workers redundant. The technology will cost 40000. The manager is considering using either internal sources or external sources to finance this technology. Table 2.1 NPX's cash-flow forecast for the period July – September 2021 (000) July August September Cash inflows 100 120 140 Cash outflows 90 90 110 Net cash flow 10 30 30 Opening balance 5 15 45 Closing balance 15 45 75

Mark scheme

Marking points from the official mark scheme (May/June 2021). The mark or mark type is shown in brackets.

1. [2] Amount of cash held by a business at the start of the month / trading period
2. [1] Partial definition e.g. cash that a business has
3. [1] Improve labour skills / (improve) training
4. [1] (Increase) motivation (or examples – max 1)
5. [1] Automation / replace workers with machines
6. [1] Use more automation
7. [1] (Introduce) new technology / (use) better machinery
8. [1] Improve quality of materials / improve quality control / introduce quality assurance
9. [1] Improve/introduce inventory control / kaizen / JIT / lean production
10. [1] Reorganise layout of factory / eliminate bottleneck.
11. [1] (Retained) profit
12. [1] Sale of (existing) non-current assets
13. [1] Sale of inventories / reduce inventory levels / sell current assets
14. [1] Owner's savings
15. [1] Reduce trade receivables / ask customers to pay more quickly / reduce time given for customers to pay
16. [1] Higher repayment costs / initial cost to buy machinery [k] which increases cash outflow [an] as need to pay $40000 [app]
17. [1] Reduce wage costs [k] as need 35 fewer employees [app] lowering cash outflow [an]
18. [1] Increased training costs [k] increasing cash outflows [an]
19. [1] Possible redundancy payments [k] increasing cash-outflow [an]
20. [1] Sell old machinery / use an external source of finance [k] which would generate a cash inflow [an]
21. [k] Consistent service / more familiar with business [an] which helps build / maintain customer relationships / better reputation
22. [k] Workers likely to be loyal/more committed / less likely to leave business [an] reducing recruitment costs
23. [k] Easy to communicate / update (compared to part-time employees) [an] leading to fewer errors / misunderstandings
24. [k] Need to recruit / train fewer employees [an] saving time or cost of recruitment / training
25. [k] Able to extend business hours [an] to maximise potential sales
26. [k] More flexible in hours of work [an] so able to cover absent workers / cover busy times
27. [k] Reduces labour costs (compared to full time) [an] as only pay employees for hours worked / when needed
28. [k] Provide different / more skills / increase the experience / more ideas [an] which otherwise may not be able to afford on a full-time basis
29. [k] (Some employees may not want full-time jobs so) may miss out on possible candidates if not offered part-time option
30. [k] Can attract well qualified employees who want to return to work but need to have flexible hours
31. [eval] A business only has to pay part-time employees for the hours worked [k] reducing its wages costs [an]. However, using full-time workers means they can provide a consistent service [k] leading to customer loyalty [an]. Therefore, I think full-time employees are better especially for a tertiary sector business as quality of service is likely to be an important way customers judge the business [eval] and therefore more likely to return, ensuring sales. [eval]