Explain two advantages and two disadvantages of using job production.

Mark scheme

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

1. [1] Advantages: Suitable for individually designed products / specialised products or services - will meet the exact requirements of the customer.
2. [1] Advantages: The workers may have more varied tasks - labour force more flexible and can move between tasks when required.
3. [1] Advantages: Higher employee motivation from more interesting work - lower labour turnover.
4. [1] Advantages: A high price can often be charged - due to possibly high-quality goods.
5. Each explanation for an advantage is awarded up to [1] mark.
6. [1] Disadvantages: Often requires skilled labour – higher wages.
7. [1] Disadvantages: Usually labour intensive – higher unit costs.
8. [1] Disadvantages: Takes longer to make the product - may delay the delivery of finished items to customers making them unhappy.
9. [1] Disadvantages: If errors are made, they are expensive to repair - increased costs.
10. [1] Disadvantages: Small quantities of specific raw materials are required – raises variable costs.
11. [1] Disadvantages: Small output (relative to batch or flow) – raises unit costs / lack of economies of scale.
12. Each explanation for a disadvantage is awarded up to [1] mark.
13. [1] Crowd-funding - Advantages: No initial fees are payable to the crowd-funding platform.
14. [1] Crowd-funding - Advantages: Allow the reaction of the public to be tested before launching new playground equipment.
15. [1] Crowd-funding - Advantages: Used by entrepreneurs when other sources have turned them down.
16. [1] Crowd-funding - Advantages: Not a debt so does not have to be repaid / no interest to pay.
17. [1] Crowd-funding - Disadvantages: Platform charges a percentage fee if finance raised.
18. [1] Crowd-funding - Disadvantages: If total amount of $20 000 is not raised, then all money paid will have to be returned.
19. [1] Crowd-funding - Disadvantages: It publicises the idea and this may allow competitors to steal the idea for new playground equipment.
20. [1] Bank loan - Advantages: Time to repay – the $20 000.
21. [1] Bank loan - Advantages: Can organise whole amount in a single transaction.
22. [1] Bank loan - Advantages: Quick to arrange.
23. [1] Bank loan - Disadvantages: Interest payable.
24. [1] Bank loan - Disadvantages: As PPE is a sole trader the rate of interest is likely to be high.
25. [1] Bank loan - Disadvantages: Security/collateral may be required.
26. [1] Bank loan - Disadvantages: May need to produce business plan/documents.
27. [1] Leasing - Advantages: Does not have to find the large amount of capital of $20 000.
28. [1] Leasing - Advantages: Maintenance paid for by leasing company.
29. [1] Leasing - Disadvantages: Repayments may be higher than if the asset was purchased straight away – over time it may be the most expensive way.
30. [1] Leasing - Disadvantages: Equipment to make playground toys may have to be returned at the end of the lease.
31. [1] Recommendation: Crowd-funding may have to be chosen if the other sources are not available to such a small sole trader business. Kaari may have no other option. Interest on the bank loan may be high making it expensive to repay and leasing will not allow PPE to keep the asset at the end of the lease and it can be a more expensive way to obtain the asset.
32. [1] Recommendation: Bank loan is the best source of finance to use. It is repayable over several years which can make it easier to make repayments each month as revenue from the sale of playground equipment comes into the business.
33. [1] Recommendation: As the business is a sole trader then Kaari is not able to make a large outlay of cash so choosing leasing is the best option as this just requires a repayment each month. Also, maintenance does not have to be paid by Kaari keeping these costs down.