Mark Scheme (Results)
October 2020
Pearson Edexcel International Advanced
Subsidiary
In Business (WBS12/01)
Unit 1: Managing Business Activities
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Autumn 2020
Publications Code WBS12_01_2010_MS
All the material in this publication is copyright
© Pearson Education Ltd 2020
General Marking Guidance
• All candidates must receive the same treatment. Examiners
must mark the first candidate in exactly the same way as they
mark the last.
• Mark schemes should be applied positively. Candidates must
be rewarded for what they have shown they can do rather than
penalised for omissions.
• Examiners should mark according to the mark scheme not
according to their perception of where the grade boundaries
may lie.
• There is no ceiling on achievement. All marks on the mark
scheme should be used appropriately.
• All the marks on the mark scheme are designed to be awarded.
Examiners should always award full marks if deserved, i.e. if
the answer matches the mark scheme. Examiners should also
be prepared to award zero marks if the candidate’s response
is not worthy of credit according to the mark scheme.
• Where some judgement is required, mark schemes will
provide the principles by which marks will be awarded and
exemplification may be limited.
• When examiners are in doubt regarding the application of the
mark scheme to a candidate’s response, the team leader must
be consulted.
• Crossed out work should be marked UNLESS the candidate has
replaced it with an alternative response.
Question Answer Mark
1(a) Knowledge 2
Up to 2 marks for defining the term ‘health and safety’, e.g.
• Measures put in place by businesses (1) to prevent accident or
injury in the workplace (1) (2)
Question Answer Mark
1(b) Knowledge 1, Application 2, Analysis 1
Quantitative skills assessed:
QS5: Calculate cost, revenue, profit and break-even
Knowledge
1 mark for identifying the formula:
Total costs
• ------------------------------ = (1)
Number of goods produced
Application
Up to 2 marks for selecting the correct data from Extract A:
Average total cost = $420 000 000 (1)
------------------
26 000 000 (1)
Analysis
1 mark for calculating the average total cost:
• Average total cost = $16.15 (1)
NB: If no working is shown, award marks as follows:
• If the answer given is $16.15 award 4 marks
(4)
• If the answer given is 16.15 award 3 marks
Question Answer Mark
1(c) Knowledge 2, Application 2, Analysis 2
Knowledge
Up to 2 marks for defining just in time (JIT) e.g.
• A manufacturing system where materials are delivered
immediately before they are needed (1) in order to minimise
costs (1)
OR
For giving two problems, e.g.
• Running out of inventory (1)
• Reliance on suppliers (1)
Application
Up to 2 marks for answers contextualised to Lotus Garments Co., e.g.
• The 11,800 employees need materials in order to make the
26,000,000 items of clothing annually (1)
• Lotus Garments Co. works closely with local suppliers (1)
Analysis
Up to 2 marks for reasons/causes/consequences for Lotus Garments
Co., e.g.
• If the employees run out of materials they cannot work and
would not be able to produce the garments needed to sell to
customers (1)
• If Lotus Garments Co. cannot rely on its local suppliers it may be
unable to meet the needs of its customers (1) (6)
Question Indicative content
1(d)
Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of
the points that candidates may make but this does not imply that any of these
must be included. Other relevant points must also be credited.
Knowledge, Application, Analysis, Evaluation – indicative content
• Total quality management (TQM) is a management philosophy that
insists quality is the responsibility of everyone in the business
• Instead of checking quality at the end of the production process, Lotus
Garments Co. now use TQM meaning workers have the authority to
stop the process if they are aware of a fault with the clothing items
• This means less material, time and labour is wasted, keeping costs
down and allowing more profit
• This is likely to be important as it produces 26 million items of clothing
• Keeping costs low is important if Lotus Garments Co. wants to remain
competitive internationally, especially as it exports the majority of its
clothing to the USA
• However, it is important Lotus Garments Co. is running efficiently in
order for TQM to be effective, it cannot simply be implemented into a
poor production process
• As there are 11,800 employees it may be difficult to successfully
implement the use of TQM
• It may take time for TQM to be effective for Lotus Garments Co. and so
it may be too early to know whether it has been successful as it was
only recently implemented
Level Mark Descriptor
0 No rewardable material.
Level 1 1–2 Isolated elements of knowledge and understanding – recall based.
Weak or no relevant application to business examples.
Generic assertions may be presented.
Level 2 3–5 Accurate knowledge and understanding.
Applied accurately to the business and its context.
Chains of reasoning are presented, showing cause(s) and/or effect(s)
but may be assertions or incomplete.
An attempt at an assessment is presented that is unbalanced and
unlikely to show the significance of competing arguments.
Level 3 6–8 Accurate and thorough knowledge and understanding, supported
throughout by relevant and effective use of the business
behaviour/context.
Logical chains of reasoning, showing cause(s) and/or effect(s).
Assessment is balanced, well contextualised, using quantitative and/or
qualitative information, and shows an awareness of competing
arguments/factors.
Question Indicative content
1(e)
Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of
the points that candidates may make but this does not imply that any of these
must be included. Other relevant points must also be credited.
Knowledge, Application, Analysis, Evaluation – indicative content
• Interest rates are the amount of interest due per period of time as a
proportion of the amount deposited, lent or borrowed
• The interest rate in Egypt rose from about 8% in 2010 to nearly 19% in
2018
• The Egyptian interest rate rose considerably from 2016 to 2018
• A rise in the interest rate would make the cost of borrowing more
expensive and reduces the disposable income of Egyptian customers who
have a loan, encouraging saving not spending
• Although clothing is necessary, it is less likely to sell if Egyptian consumers
have a reduced disposable income
• In order to increase sales domestically, Lotus Garments Co. may need to
borrow money to finance an advertising campaign to promote its goods or
to conduct market research
• Given the increasing interest rate, it is probably not a good time for Lotus
Garments Co. to consider expanding sales domestically
• However, Lotus Garments Co. exports the majority of its denim to the USA
and so the customers would not be affected by the Egyptian interest rate
• There is no information about how much or whether Lotus Garments Co.
actually borrows money at the moment
• As it can produce 26,000,000 items of clothing a year, Lotus Garments Co. is
likely to be a large business which may not be affected greatly by interest
rates
• Lotus Garments Co. may have profits invested which could generate more
income when the interest rate is high
• It may depend on other economic influences such as the exchange rate. A
high interest rate may encourage foreign investment meaning the value of
the Egyptian currency (Egyptian pound) may rise, possibly leading to a fall
in exports due to the price of jeans becoming more expensive
• It depends whether the trend of rising/high interest rates continues and
on other economic influences such as the rate of inflation or level of
wages in Egypt
Level Mark Descriptor
0 A completely inaccurate response.
Level 1 1–2 Isolated elements of knowledge and understanding – recall based.
Weak or no relevant application to business examples.
Generic assertions may be presented.
Level 2 3–4 Elements of knowledge and understanding, which are applied to the
business example.
Chains of reasoning are presented, but may be assertions or
incomplete.
A generic or superficial assessment is presented.
Level 3 5–7 Accurate and thorough knowledge and understanding, supported
throughout by relevant and effective use of the business
behaviour/context.
Analytical perspectives are presented, with developed chains of
reasoning, showing cause(s) and/or effect(s).
An attempt at an assessment is presented, using quantitative and/or
qualitative information, though unlikely to show the significance of
competing arguments.
Level 4 8–10 Accurate and thorough knowledge and understanding, supported
throughout by relevant and effective use of the business
behaviour/context.
A coherent and logical chain of reasoning, showing cause(s) and/or
effect(s).
Assessment is balanced, wide ranging and well contextualised, using
quantitative and/or qualitative information and shows an awareness of
competing arguments/factors, leading to a supported judgement.
Question Answer Mark
2(a) Knowledge 2
Up to 2 marks for defining the term ‘break-even’, e.g.
• Where total cost (1) is equal to total revenue (1) (2)
Question Answer Mark
2(b) Knowledge 1, Application 2, Analysis 1
Quantitative skills assessed:
QS1: Calculate, use and understand ratios, averages and fractions.
Knowledge
1 mark for identifying the operating profit formula:
• operating profit
-------------------- x 100 (1)
revenue
Application
Up to 2 marks for selecting the correct data from Extract C:
• NZ$32 175 (1)
---------------- x 100
NZ$104 625 (1)
Analysis
1 mark for calculating the operating profit margin:
• Operating profit margin = 30.75% (1)
NB: If no working is shown, award marks as follows:
• If the answer given is 30.75% award 4 marks
(4)
• If the answer given is 30.75 award 3 marks
Question Answer Mark
2(c) Knowledge 2, Application 2, Analysis 2
Knowledge
Up to 2 marks for defining a lifestyle business e.g.
• A business set up with the aim of making no more than a set
level of income (1) from which to enjoy a particular lifestyle (1)
OR
For giving two reasons, e.g.
• It is a small business which allows the founders to sustain their
chosen lifestyle (1)
• Founders have a shared personal interest (in nutritious food
and healthy lifestyles) (1)
Application
Up to 2 marks for answers contextualised to Soul Boul, e.g.
• Stacey and Alexandra are able to spend the winters in Bali,
Indonesia (1)
• The owners sample ingredients for smoothie bowls during
their time away (1)
Analysis
Up to 2 marks for reasons/causes/consequences for Soul Boul, e.g.
• By earning enough during summer months in New Zealand,
Stacey and Alexandra can afford to travel at other times of the
year (1)
• As a result, Stacey and Alexandra are able to offer their
customers new, interesting and healthy foods that they are
passionate about and believe to be part of the healthy lifestyle (1) (6)
Question Indicative content
2(d)
Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of
the points that candidates may make but this does not imply that any of these
must be included. Other relevant points must also be credited.
Knowledge, Application, Analysis, Evaluation – indicative content
• Personal savings is finance that an individual, rather than a business, has
accrued, which is often saved in a bank
• Stacey and Alexandra saved their wages whilst working in the hospitality
industry for six years
• Using personal savings is the easiest source of finance to use to set up a
business and Stacey and Alexandra would not need to pay interest or
worry about having finance lenders dictating terms on how to run Soul
Boul
• As they do not need to repay any profits made by Soul Boul to anyone else,
Stacey and Alexandra can afford to spend winters in Bali, Indonesia.
• However, the money saved by Stacey and Alexandra is at risk if the
business fails
• As Stacey and Alexandra have only worked in the hospitality industry and
have not run a business before, they may be less likely to be successful
and more likely to lose the savings they put into the business
• It depends how much of their savings were needed to set up Soul Boul as
Stacey and Alexandra may still have savings in the bank after they set up
their business
Level Mark Descriptor
0 No rewardable material.
Level 1 1–2 Isolated elements of knowledge and understanding – recall based.
Weak or no relevant application to business examples.
Generic assertions may be presented.
Level 2 3–5 Accurate knowledge and understanding.
Applied accurately to the business and its context.
Chains of reasoning are presented, showing cause(s) and/or effect(s)
but may be assertions or incomplete.
An attempt at an assessment is presented that is unbalanced, and
unlikely to show the significance of competing arguments.
Level 3 6–8 Accurate and thorough knowledge and understanding, supported
throughout by relevant and effective use of the business
behaviour/context.
Logical chains of reasoning, showing cause(s) and/or effect(s).
Assessment is balanced, well contextualised, using quantitative and/or
qualitative information and shows an awareness of competing
arguments/factors.
Question Indicative content
2(e)
Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of
the points that candidates may make but this does not imply that any of these
must be included. Other relevant points must also be credited.
Knowledge, Application, Analysis, Evaluation – indicative content
• A business can fail due to internal causes which may be controllable and
external causes which are not controllable
• Internal causes include poor cash flow management, overtrading and
poor inventory control. External causes include exchange rates, interest
rates and supplier problems
• The hotel mainly failed due to internal causes: poor quality, poor
marketing (negative reviews on social media) and overestimation of sales
(thinking there would always be other tourists)
• This means Stacey and Alexandra could aim to make sure they maintain
high levels of quality (something they already do) as well as focus
attention on keeping customers happy so they receive positive reviews
and benefit from new and returning customers
• Stacey and Alexandra review their ingredients annually. They also have
positive attitudes and are prepared to work hard
• Therefore, Soul Boul can make sure it does not experience the same
causes of business failure as the hotel
• However, one of the causes of failure for the hotel was external. There
were three other hotels within 1 km, meaning competition was high in
the area
• Soul Boul is clearly successful and profitable, this may cause other
businesses to set up in competition
• Stacey may have been unaware of other causes of failure for the hotel,
such as economic conditions at the time
• Soul Boul cannot control the external causes of business failure such as
competition or economic and market conditions and so it may still face
problems even if it successfully avoids internal causes
• Although Soul Boul cannot ensure it avoids all causes of business failure,
it can do its best to avoid those it can control and prepare for those it
cannot, therefore reducing the risk of becoming a failing business like
the hotel
Level Mark Descriptor
0 No rewardable material.
Level 1 1–2 Isolated elements of knowledge and understanding – recall based.
Weak or no relevant application to business examples.
Generic assertions may be presented.
Level 2 3–4 Elements of knowledge and understanding, which are applied to the
business example.
Chains of reasoning are presented but may be assertions or
incomplete.
A generic or superficial assessment is presented.
Level 3 5–7 Accurate and thorough knowledge and understanding, supported
throughout by relevant and effective use of the business
behaviour/context.
Analytical perspectives are presented, with developed chains of
reasoning, showing cause(s) and/or effect(s).
An attempt at an assessment is presented, using quantitative and/or
qualitative information, though unlikely to show the significance of
competing arguments.
Level 4 8–10 Accurate and thorough knowledge and understanding, supported
throughout by relevant and effective use of the business
behaviour/context.
A coherent and logical chain of reasoning, showing cause(s) and/or
effect(s).
Assessment is balanced, wide ranging and well contextualised, using
quantitative and/or qualitative information, and shows an awareness
of competing arguments/factors, leading to a supported judgement.
Question Indicative content
3
Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of
the points that candidates may make but this does not imply that any of these
must be included. Other relevant points must also be credited.
Knowledge, Application, Analysis, Evaluation – indicative content
Budget based on historical figures
• A budget is a target for costs which the business aims to meet over a
period of time. A budget based on historical figures will set targets
according to the amount spent in previous years
• Kenya Airways would be able to work towards a maximum cost target
in order not to overspend at a time when it is trying to reduce costs
• It would allow Kenya Airways to pursue its plans based on the
improving financial situation experienced in 2017
• Rising fuel costs (by 22 per cent in June – November 2017) are likely to
continue to contribute a great deal to Kenya Airways’ costs and so this
type of budget may be more realistic in planning for the year ahead
• However, Kenya Airways made a loss of Ks5.97bn in 2017 and Ks29.7bn
in 2015 meaning basing the budget on historical figures may not be a
good idea
• Each department within Kenya Airways is likely to want to maintain its
budget and so targets based on historical figures are likely to creep up
over time, not allowing the airline to control costs as is wanted by chief
executive, Sebastian Mikosz
• Although improving, Kenya Airways still made a net loss in 2017 and
may not be able to return to making a profit if it does not change its
base for costs
• Kenya Airways has introduced a new route (Nairobi direct to the US)
meaning additional costs may be required compared to historical
figures
Zero based budget
• A zero based budget means the budget will be set to zero at the start
of each year and the budget holder will need to justify all money that is
allocated to it
• This would allow Kenya Airways greater control over its costs and
therefore help it to become profitable again
• As the economic climate in Kenya was believed to be a factor in
reducing domestic flights by 20% and fuel prices rose by 22% in the
second half of 2017, Kenya Airways may find a zero based budget more
reliable in keeping on top of fluctuating factors that are outside of its
control due to approval being needed for all spending
• However, it takes time and money to set up and maintain a zero based
budget, meaning it may be more costly for Kenya Airways to use
• Kenya Airways has an excellent reputation for employment but this
could be damaged if employees feel uncomfortable about being
challenged for all costs incurred
• As the airline has introduced a new direct route from Nairobi to the
US, the focus for costs may fall here, rather than on other more long-
term plans. This could be disadvantageous if it needs investment
under a zero based budget
• It depends whether the reason for making a loss in recent years has
been dependent on costs being too high or on revenues being too low
• As several factors affecting the costs of Kenya Airways have been
outside of its control, it may not make a great deal of difference which
type of budget is used
Level Mark Descriptor
0 No rewardable material.
Level 1 1–4 Isolated elements of knowledge and understanding.
Weak or no relevant application of business examples.
An argument may be attempted, but will be generic and fail to connect
causes and/or consequences.
Level 2 5–8 Elements of knowledge and understanding, which are applied to the
business example.
Arguments and chains of reasoning are presented but connections
between causes and/or consequences are incomplete. Attempts to
address the question.
A comparison or judgement may be attempted but it will not
successfully show an awareness of the key features of business
behaviour or business situation.
Level 3 9–14 Accurate and thorough knowledge and understanding, supported
throughout by relevant and effective use of the business
behaviour/context.
Uses developed chains of reasoning, so that causes and/or
consequences are complete, showing an understanding of the question.
Arguments are well developed.
Quantitative and/or qualitative information is introduced in an attempt
to support judgements, a partial awareness of the validity and/or
significance of competing arguments and may lead to a conclusion.
Level 4 15–20 Accurate and thorough knowledge and understanding, supported
throughout by relevant and effective use of the business
behaviour/context.
Uses well-developed and logical, coherent chains of reasoning, showing
a range of cause and/or effect(s).
Arguments are fully developed.
Quantitative and/or qualitative information is/are used well to support
judgements. A full awareness of the validity and significance of
competing arguments/factors, leading to balanced comparisons,
judgements and an effective conclusion that proposes a solution and/or
recommendations.
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