O-LevelBusiness StudiesFinancial information and decisions7115/21 · May/June 2018 · Q320 Marks

Identify and explain two legal controls that could affect Peter when recruiting and employing workers.

(a)Identify and explain two legal controls that could affect Peter when recruiting and employing workers.[8]
(b)(i)Refer to Appendix 2. Complete the break-even chart below by drawing the Total Revenue line.[1]
(b)(ii)Identify the break-even number of customers per day.[1]
(b)(iii)Consider the following two ways Peter could use to try to increase profit. Recommend which way he should choose. Justify your answer.[10]

This question uses a diagram from the original paper, which isn't shown here. Open the full paper from the past papers archive to see it.

Mark scheme

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

[1] (a) Pay minimum wage
[1] (a) Employer liability insurance required
[1] (a) Legal citizenship/work permit/licence required
[1] (a) Ensure a safe working environment/Health and Safety laws observed
[1] (a) No discrimination when recruiting workers
[1] (a) Not employing children
[1] (a) No unfair dismissal
[1] (a) Number of hours worked may have a maximum limit
[3] (a) Indicative response: It is important to pay at least the minimum wage (1) set by the government or the owner will be prosecuted. (1) This may mean that Peter has to pay higher wages than he wants to pay and the wage costs of the gym might be high. (ap) It might mean that Peter cannot afford to employ as many trainers as he wants at the gym due to the high cost. (ap)
[1] (b)(i) 1 mark for correct TR line – starts at 0 and goes up to $500
[1] (b)(ii) 1 mark for break-even number of customers = 20
[1-3] (b)(iii) (L1) Outline of advantages and disadvantages of each option. (max of 3 marks) E.g. Increasing prices will increase inflows from increased revenue.
[4-6] (b)(iii) (L2) Detailed discussion of advantages and disadvantages of each option. 1 × L2 explanation can gain 4 marks and a further mark can be awarded for each additional L2 explanation (max 6 marks) E.g. Increasing prices will increase inflows from increased revenue which will help to increase the profit at the gym. However, if prices are much higher than similar competing gyms then VG will lose customers and cash inflows will fall.
[7-10] (b)(iii) (L3) For L3 to be awarded there needs to be at least two L2 marks awarded and then a recommendation that justifies which option to choose. 7-8 marks for limited judgement shown in recommendation as to which option to use OR why the alternative option is not chosen. 9-10 marks for well justified recommendation as to which option to use AND why the alternative option is not chosen. Note: Do not award application marks in (iii)
(b)(iii) (Advantages of Increase prices) Increase in revenue if same number of gym members remain; Increase inflows of cash; Reduces break-even number of customers
(b)(iii) (Disadvantages of Increase prices) Possible decreased demand – as situated in low income area – so overall effect may not be to increase revenue and inflows; Expect higher quality facilities so may need to invest in more equipment
(b)(iii) (Advantages of Reduce variable costs) Less outflows; Increased profit; Reduces break-even number of customers
(b)(iii) (Disadvantages of Reduce variable costs) Lower quality provision; Deter customers as perceived as reduced service