SOLS makes 5 styles of luxury shoes for men, using job production. SOLS operates in a niche market. Quality assurance is important. All materials, including leather, are imported. SOLS uses cost plus pricing. The shoes are sold directly to customers through its website. The Managing Director said: 'We can sell our shoes for $100 less a pair than our competitors because we have no shops.' Demand is increasing and the Managing Director has to decide whether to change to batch production.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2018). The mark or mark type is shown in brackets.

1. [2] Clear understanding – e.g. highly specialised sub part of a large market
2. [1] Some understanding – e.g. small part of a market OR specialist market OR part of the market with specific needs and characteristics
3. [1] Wider target market / more people to sell to / accessible worldwide
4. [1] Lower fixed cost
5. [1] 24 hour access
6. [1] Reinforce image
7. [1] Provide information
8. [1] Way to obtain / ask for feedback
9. [2] Quality assurance involves checking throughout the process such as making sure leather used is suitable
10. [2] Quality control happens at end after shoes have been made
11. [2] Quality assurance means everyone is involved in checking such as each worker producing different styles
12. [2] Quality assurance is process orientated whereas quality control is product orientated
13. [3] Advantage: Know that the costs will be covered and they can make a profit per item even though they can sell items for less than competitors.
14. [3] Advantage: Simple / easy to calculate so saves time when setting prices for shoes.
15. [3] Advantage: Know their profit margin / profit per item.
16. [3] Advantage: Different mark ups could be added for the 5 styles.
17. [3] Disadvantage: Does not consider what competitors do so price set might be uncompetitive for each style.
18. [3] Disadvantage: Does not take account of changes in demand OR spending patterns so could lead to fewer sales being made.
19. [3] Disadvantage: Little incentive to control costs.
20. [3] Disadvantage: Prices could be higher than competitors.
21. [1] Knowledge: identification of relevant issue(s)
22. [1] Application: relevant reference made to this business
23. [2] Analysis: relevant development of point(s)
24. [2] Evaluation: justified decision made as to whether SOLS should change its method of production
25. Job production: Meet exact customer demands / unique / higher quality so able to charge higher price in a niche market
26. Job production: More varied work leads to higher motivation leading to few workers leaving / less absenteeism
27. Job production: Change could damage reputation for its luxury product which could lower its sales
28. Batch production: Flexible or easy to switch production between the 5 styles so able to react quickly to changes in customer demand
29. Batch production: Some economies of scale leading to lower average costs
30. Batch production: Can be demotivating for employees (as work likely to be more repetitive) so may not pay as much attention to quality assurance increasing amount or cost of wastage
31. Batch production: Able to produce more which is important as demand has increased so maybe able to meet additional demand
32. Batch production: Cost of new equipment OR training