DCP makes a range of high quality industrial paints. It sells direct to 6 large business customers which are located in different countries. DCP charges a price of 0.35 per litre. It operates in a competitive market. The Operations manager has been looking at DCP's costs as shown in Table 2. He wants to increase profit but he does not want to buy cheaper materials. Table 2: Output and cost information for DCP per week Output (litres) 1500 000 Total fixed costs () 350000 Total material costs () 60000 Total labour costs () 40000

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2016). The mark or mark type is shown in brackets.

1. [1] planning
2. [1] organising
3. [1] co-ordinate
4. [1] command
5. [1] control
6. [1] motivate/supervise
7. [1] decision making
8. [1] problem solving
9. [1] recruit
10. [2] Good application 30 c or 0.3 (per litre)
11. [1] Some application e.g. total cost divided by output OR 450000 / 1 500 000
12. [1] Email/website/social networks [k] as customers are in different countries [app]
13. [1] Meetings [k] as only have 6 customers [app]
14. [1] Phone/text [k] as able to quickly check information about paint orders [app]
15. [1] Letter [k]
16. [1] faxes [k]
17. [1] Good reputation/brand image [k] so customers trust the paint [app] which could help increase sales [an]
18. [1] Attract new customers [k] as products might be better than rivals [app]
19. [1] Meet legal controls [k] as contains chemicals [app] must be safe to avoid being prosecuted/sued [an]
20. [1] More competitive [k] as paint is very similar [app] this could give them a competitive advantage over its rivals [an]
21. [1] Create brand/customer loyalty [k] so business [app] customers keep returning [an]
22. [1] Can charge a higher price [k] than 35 c per litre [app] to increase revenue [an]
23. [1] sales might fall [k] if quality is lowered [an] because it is a competitive market [app]
24. [1] Revenue could increase[k] and if quantity and costs of the paint [app] remain the same profit could increase [an]
25. [1] Demand may fall [k] as customers might choose rival products [an] in this competitive market [app]
26. [1] if demand is price inelastic [k] higher price will see a lower fall in demand [an] therefore revenue will rise [an]
27. [1] business may be able to lower costs [k] therefore increasing profit with current prices [an]
28. [1] It would reinforce the image [k] of high quality [app] customers might be happy to pay it [an]
29. [1] depends on actions of competitors [k]