7100 s05 Ms 2

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

MARK SCHEME for the June 2005 question paper

7100/02
7100/02 Commerce, Paper 2, maximum raw mark 80

This mark scheme is published as an aid to teachers and students, to indicate the
requirements of the examination. It shows the basis on which Examiners were initially
instructed to award marks. It does not indicate the details of the discussions that took place
at an Examiners meeting before marking began. Any substantial changes to the mark
scheme that arose from these discussions will be recorded in the published Report on the
Examination.

All Examiners are instructed that alternative correct answers and unexpected approaches in
candidates scripts must be given marks that fairly reflect the relevant knowledge and skills
demonstrated.

Mark schemes must be read in conjunction with the question papers and the Report on the
Examination.

CIE will not enter into discussion or correspondence in connection with these
mark schemes.

CIE is publishing the mark schemes for the June 2005 question papers for most IGCSE and
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.

June 2005

GCE O LEVEL

MARK SCHEME

MAXIMUM MARK: 80

SYLLABUS/COMPONENT: 7100/02

COMMERCE

Page 1 Mark Scheme Syllabus Paper
GCE O LEVEL JUNE 2005 7100 2

University of Cambridge International Examinations 2005
1 (a) Any six points of explanation including development x 1 mark each e.g.

needs are essential for human beings
e.g. food, shelter
wants are non-essential requirements
e.g. transport, entertainment
(these are provided for by home trade) - trade within a country or retail or wholesale
trade
(and by international trade) - imported goods and services

any other relevant point, accept reasons for trade e.g. comparative advantage [6]

(b) For both sections any five points x 1 mark each (including up to 2 marks for a well
developed point) e.g.

communication - need for rapid communication
between traders in different countries such as e-mail, fax, list = 1 max
development of video/teleconferencing need for information - use
of Internet
need to place orders
need to follow through orders [5]

warehousing - need for storage
at ports/airports/border crossings
need for bonded warehouses for dutiable goods
storage of seasonal goods ready for export
maintenance of supply
protection of good against theft/weather
preparation for sale [5]

any other relevant point must be in context

(c) Any two points explained to justify opinion x 2 marks or 4 x 1 mark e.g.

countries that cannot produce certain goods are dependent on others who produce
what they lack - example
countries depend on other countries to buy their surpluses and so earn foreign
currency
because transport is now easier more people travel and see what other countries can
offer
they expect a higher standard of living than previously and this can only be satisfied
by importing some goods
some countries are also interdependent politically
in trading blocs e.g. ASEAN
or because they are so small that they are dependent on larger neighbours e.g.
Lesotho and South Africa
some countries are able to produce almost everything they need and so are not
interdependent
others prefer to produce what they can produce most efficiently - comparative
advantage
efficiency of some aids to trade

any other relevant point [4]

2 (a) (i) Any two points x 1 mark each e.g.

electronic commerce
buying and/or selling using a computer/through the Internet [2]

(ii) Any two reasons explained x 2 marks each e.g.

many companies wish to expand their markets without incurring the expenses of
additional shop space
their competitors are offering e-commerce, so they must offer e-commerce to
remain competitive
an increasing number of people have access to computers and to the Internet
suitable for a large range of products/services
some of the difficulties of using Internet shopping have been overcome - danger
of credit card fraud
many people have little time to go shopping and prefer to shop on-line
saves time and money on other forms of advertising


(b) (i) (4 x $50) + (2 x $25) (1 mark) = $250 OFR applies
If the correct answer is given without working award full marks [2]

(ii) A courier/parcel post/van/road/agents [1]
B airmail/air/DHL, etc. [1]

(c) Any four points x 1 mark or 2 well developed points x 2 marks

to make the chocolates more attractive than other chocolates
chocolates are often given as presents so colour adds to this
the brand can be included on the packaging to attract attention
so that the packaging attracts attention - may mean more orders
can be used as part of the advertising on the website
to encourage impulse buying



(d) Level 3 (5 - 6 marks)

Has discussed one or more ways in which staff might make use of computers.

e.g. Staff might use computers to keep control of the stock and to re-order when stocks
are low. They might use electronic communication with other parts of the business or with
suppliers such as e-mail and fax. They may keep a database of customers so that orders
can be handled efficiently and customers can be contacted with new products. They
might word-process communication with customers and design new sales literature using
desktop publishing to save on printing costs and make their products appeal more to
customers.

Level 2 (3 - 4 marks)

Has attempted to discuss one or more ways in which staff might make use of computers
OR
has shown the purposes of some computer packages
e.g. staff may use computers for many purposes such as stock control and managing
accounts. They may contact customers by e-mail because it is much quicker than letter.


Has listed some ways in which computers might be used
e.g. using e-mail, ordering goods, sending a fax

Points that might be included:

stock control in warehouse
use of computers in documentation process
use of Internet banking to run the business' finances
communication with other parts of the business - intranet, fax, e-mail
communication with suppliers - fax, e-mail
communication with customers - fax, e-mail
use of computer software to manage accounts
database of customers and their details
word processing advertising literature, communication with customers desktop
publishing for communication and advertising material
use of the Internet to view competitors and to obtain information



3 (a) Any six points x 1 mark each or 3 well developed points x 2 marks

invoice is the bill for one transaction
it gives details about this transaction
it can be used by the buyer to check against the items ordered
it may be used to ask the buyer to pay the amount
it is used to write up the accounts
it provides a record of the transaction

statement - shows all transactions between buyer and seller for
a period of time/month
gives summary of each transaction
is a reminder to buyer to pay the whole debt
enables the buyer to check his own records
enables buyer to make one payment/cheque per month so saving on time and costs
linked to purchases on credit


(b) Any four points x 1 mark each or 2 well developed points x 2 marks e.g.

crossed cheques are safe because they must be paid into a bank account
they cannot be cashed across the bank counter
they can also be specially crossed/example
the payees account is credited once the cheque has been cleared
acts as a receipt for payment
dangers of cash 1 mark maximum


(c) (i) Any three points x 1 mark each e.g.

suitable for paying variable/fixed mounts
at variable times
direct debit form is completed
computerised transfer
paid by the bank when the creditor asks for payment
worthwhile example [3]

(ii) Any three points x 1 mark each e.g.

Yes = 0 marks

saves the buyer remembering due dates of payment
will save the company using other means of payment e.g. cheques ensures that
payment is made on time
so the buyer can take advantage of cash discounts offered and preserve the
companys credit rating with the supplier
enables transactions to be computerised
saves clerical work
may be cheaper/quicker (1 mark only unless qualified)


No = 0 marks

less control over when payment is made as the creditor asks for payment and the
bank then pays
may mean the company is overdrawn if too many other commitments when the
direct debit is paid [3]

(d) Any four points x 1 mark each or 2 well developed points x 2 marks e.g.

to find out what services are available from particular banks
to set up the accounts of the company
to find out the status of the companys bank account at any one time
to make payments for supplies/to creditors
to enable payments to be made into the accounts
to transfer funds between accounts
to call up a statement on any bank account
to obtain information on any service offered by the companys bank
to review the companys borrowing commitment with the bank


4 (a) Any six points x 1 mark each or 3 developed points x 2 marks

buying in bulk - obtain discounts - lower prices to customers
employment of specialist buyers - quality goods at competitive prices
can afford to use regional distribution centres and own transport
can use self service - savings on sales staff
should have quick turnover - beneficial when selling perishables
economies of scale - administration/advertising
use of technology - bar coding, epos
offers wide range of goods
attracts customers
profit


(b) (i) Any three points x 1 mark

saves on sales staff - stocking shelves, manning tills
may encourage impulse buying - so greater turnover
may encourage more shoppers who want to self select
involves less work for retailer than offering personal service [3]

(ii) Any three points x 1 mark each

makes the goods offered by Bonusbuy distinctive
enables customers to recognise the products
assists Bonusbuy to advertise
may be able to offer these goods more cheaply than other brands because has
placed a bulk order with a particular producer
encourages brand loyalty/goodwill [3]


(iii) Any three points x 1 mark each

may speed up individual transactions at the till
may reduce human error at the till
saves pricing goods individually
enables stock control to be computerised
enables Bonusbuy to see which types of goods are selling
enables re-ordering to be computerised
and so reduces costs to Bonusbuy


(c) Level 2 (3 - 5 marks)

Has analysed the issues and made a reasoned judgement commenting on pricing and
special offers - (3 - 4 marks). May have introduced other selling or promotional methods
(up to 5 marks).

e.g. supermarkets buy in bulk and so can offer lower prices to consumers. They offer loss
leaders and special offers such as two for the price of one to customers to keep their
loyalty and to tempt them away from their competitors. They monitor consumer buying
habits and are constantly looking for new products. Supermarkets compete for
consumers who are price conscious but they also compete with other supermarkets in
terms of services offered, range of goods offered and brands stocked.


Has made some comment on pricing and/or special offers with/ without a superficial
judgement

e.g. Supermarkets always try to offer low prices to attract customers. They may also give
special offer to their customers.


supermarkets bulk buy and so can offer lower prices to consumers
they attempt to obtain large discounts from producers
they may offer loss leaders on certain products to tempt consumers
they obtain information on the activities of their competitors
they are constantly monitoring trends in consumer buying habits
they are always looking for other market opportunities/new products
they also compete in terms of location/services/loyalty cards



5 (a) Any two characteristics explained x 2 marks e.g.

owners are shareholders who have limited liability
has shares which are sold on stock exchanges
registered under the Companies Acts with Ltd as part of name
controlled by board of directors elected by shareholders
ultimate power with shareholders voting at AGM
must have trading certificate to start operating
minimum of 2 shareholders, no maximum
usually a large business enjoying economies of scale
separate legal entity apart from its shareholders

any other relevant characteristic [4]

(b) Any two points explained x 2 marks each e.g.

to promote trade and clear warehouse
to maintain and increase its market share against any competitors also offering credit
to allow the retailers to sell the goods before they have to pay
to enable the retailers to make a series of transactions - pay a number of bills at one
time
to enable discount to be offered for prompt payment
builds up goodwill between Bing Ltd and its customers
to enable small scale retailers to use cash for other purposes

any other relevant reasons [4]

(c) Any three other services explained x 2 marks each e.g.

offer a variety of goods often displayed in warehouse
supply goods to retailers in the quantities they require
store goods ready for sale retailer does not need to hold large stocks
give information - on new lines
passing information from retailers to manufacturers
breaking bulk
delivery of goods retailer has no transport
preparing goods for sale e.g. bottling, packaging
offering cash and carry - helps retailers to obtain goods at lower prices
acting as risk bearers - buying goods from manufacturers before selling them to the
retailers
giving trade discount - enabling the retailer to make a profit

any other relevant service [6]


(d) Level 3 (5 - 6 marks)

Has analysed and justified the need for the three business risks specifically or has shown
clearly why Bing Ltd does not need cover for some of these business risks (possibly
mentioning others that might be needed)

e.g. Bing Ltd would need public liability because it deals with the public who might have
accidents because of Bing Ltds negligence and demand compensation. Bing Ltd would
be required by law to have employers liability insurance because it employs a large
number of people, some of whom might have accidents at work because of the companys
negligence. Consequential loss would be needed if the business closed down because of
a fire. It would cover loss of profits and other expenses while repairs were carried out.
Insurance against these risks and others such as fire, theft and motor are essential
because they protect the company against financial loss and give it the confidence to
carry on its business.


Has explained the need for insurance cover making a judgement as to whether or not
Bing Ltd needs this cover with reference to one or more of the three business risks.

e.g. Bing Ltd would need public liability insurance to protect itself against claims made by
the public because of its negligence. The same applies to employers liability because
employees who have accidents at work might claim against the company.


(Definitions only Level 1 max)
Has commented on the need/or no need for insurance cover.

e.g. Bing Ltd needs insurance to provide cover against loss and also to provide it with
compensation in case of loss.


Public liability - needed because Bing Ltd deals with customers who may make a
claim because of an accident on Bing Ltds premises
Employers liability - required by law as Bing Ltd employs a large number of people,
some of whom might make claims as a result of accidents while working for Bing Ltd
consequential loss - needed because Bing Ltd would have to close down in the event
of a fire. Covers loss of profits during this time and the expenses of restoring the
business
may need other insurance cover - fire, theft, fidelity bond, motor
may need insurance in order to claim compensation, to gain financial protection, help
business confidence
may decide does not need some of the forms of insurance because the business
decides to be its own insurer - this is unlikely as large risks are involved and
employer's liability is required by law. [6]


6 (a) Any one advantage x 1 mark each e.g.

B more freight carried by air
C rising popularity of low cost airlines
D emergency aid can be sent by air [1]

Any one disadvantage x 1 mark each e.g.

A successful airlines cannot fly all routes
C more congestion at overcrowded airports
E allow delays caused by airport security services [1]

(b) Any six points x 1 mark or 3 developed points x 2 marks or 2 x 3 marks e.g.

increased trade in perishable and valuable goods e.g. flowers
need for speed to transport many kinds of goods successfully
growth of global economy and increased demand for foreign goods
increased number of airports, air routes, air cargo planes
larger carrying capacity of air cargo planes
can transport goods for long distances and reach inaccessible places
increase in the number of goods which are of low bulk and high value and so can
cover the costs of air freight
some expenses of air freight are lower - insurance, packaging because of the speed
of transport
possibly more secure than other forms of transport
other forms of transport may not be available to certain areas - sea transport to a
landlocked country
specialist facilities for carrying certain cargoes e.g. horses
lower freight cheaper plus reason cheap/quick = 0 unless qualified


(c) (i) Any two services x 1 mark each

security = 1 mark
x-ray machines, customs and immigration, security officers, allow restricted access to
departure lounges, CCTV, use of dogs, restrictions on certain items carried in
luggage, armed police, metal detectors, checking luggage, fire brigade, first aid [2]

(ii) Any four points x 1 mark each or 2 developed points x 2 marks

they offer cheap travel offer many routes
they offer frequent services they do not provide unwanted services
abolition of cartels they undercut established airlines
operate from small/local airports booking procedures online



(d) (i) Any two points x 1 mark each e.g.

speed of transport, can be provided quickly
able to reach inaccessible places
can transport variety of goods
variety of aircraft/helicopters available
medicines have to reach victims as soon as possible [2]

(ii) Any two groups x 1 mark each + 1 mark for reason e.g.

medicines, animals, mail
perishables - need for speed so that they will be fresh when delivered
fragile goods - less likely to be damaged than by using other transport
lightweight goods - reasonable cost as charges often relating to weight
valuable goods - need for security, can bear high air freight charges
any other relevant group

NB if an example is given instead of a group, mark reason only [4]

7 (a) (i) Any three points x 1 mark each e.g.

an enterprise that has subsidiaries or branches in more than one country
with a head office where the parent company originated
it may secure raw materials in one country
have factories in other countries where labour costs are low
example = 1 mark [3]

(ii) Any three reasons x 2 marks each e.g.

they are large public limited company and control many of the worlds industries
they provide employment in many countries and so reduce unemployment levels
they provide inward investment and contribute in terms of taxes/infrastructure to
host countrys economy
they are often very powerful and able to move resources between countries
they provide very large quantities of goods/services in the global economy +
example such as oil
use of new technology
huge investment in R&D
improve standard of living


(b) (i) trade credit/overdraft any one [1]

(ii) bank loan/retained profit/debentures/ordinary shares any one [1]

(c) For each part award one mark for correct finance and two marks for reasons e.g.

(i) retained profits no interest to be paid, readily available
bank loan large sum needed, can be repaid gradually [3]


(ii) ordinary shares requires large sum, does not have to be repaid
debentures large sum available, long term repayment, low interest
bank loan large sum required, interest payments can be made over
a long period, when factory comes into production it may
help towards the repayments, assets can be used as
collateral
retained profits [3]

(iii) overdraft uses only what is required at any one time
easily arranged, interest paid on amount overdrawn

trade credit can sell goods before having to pay the supplier and use
the profit to pay for further supplies [3]

8 (a) (i) Any three points x 1 mark each e.g.

to give details/information such as
kinds of services offered/prices charged/area covered/ target audience/how to
make contact (any two)
may also be recruiting staff [3]

(ii) Any three points x 1 mark each e.g.

possibly not as important as informative advertising
to encourage potential customers to use her services especially if there is
competition in the market
to enable her to establish her business
shows her services are better than competition [3]

any other relevant points

(b) Level 3 (5 - 6 marks)

Has analysed the three general factors in relation to Ritas business and has made a
judgement based on this analysis.

e.g. Rita has just set up her business so it is likely she will have a limited budget. She will,
therefore, not be able to use expensive advertising media such a national newspapers.
Ritas target audience is likely to be small - people requiring nursing at home or hospitals
needing nurses so she will need to choose media that target those market segments such
as nursing magazines and leaflets that can be sent out. Methods of appeal are not likely
to be so important as Rita needs to give information about her services rather than use
any devices such as colour and music in the content of the advertisements she uses to
persuade people to use her services.



Has commented on one or more of these factors and has made a judgement based on the
comments OR has offered some analysis on one or more of the factors without a clear
judgement.

e.g. The cost of the media and the people she is aiming her advertising at will be very
important as Rita is likely to have limited money to spend on advertising. She is starting
her business and so will be looking to spend as little as possible on advertising. She will
probably not consider methods of appeal as she wants to give out information.


Has commented on one or more of the factors listed.

e.g. Rita will not spend very much on advertising and she will be advertising to anyone
who is ill.


cost of media - Rita may be on a limited budget as she is setting up the business
some media are more expensive than others - leaflet might be suitable, nursing
magazine would be suitable, TV would not
target audience - should be considering their age and income, may be targeting
people caring for elderly relatives or people in hospitals who require private nurses
methods of appeal - possibly not so important as it would be if Rita was selling goods.
Accurate and detailed information in the advertisement is likely to be the best method
of appeal [6]

(c) (i) Any four points x 1 mark each or two well developed points e.g.

definition of working capital - CA - CL - allow 1 mark
Rita needs working capital to meet her day to day expenses such as
wages/buying supplies/electricity/telephone and unexpected bills (1 mark max)
without working capital the business cannot pay bills promptly and may need to
borrow
it will also restrict its activities
it could slip into insolvency


(ii) Any four points x 1 mark each or 2 developed points x 2 marks:

sell more services
make sure that she does not expand too quickly especially by borrowing
keep control of costs especially wages
make sure that realistic prices are charged for the services
prepare a budget and monitor the budget
make sure that she has sufficient working capital to maintain cash flow
offer quality service repeat business


advertising = 0 unless qualified e.g. to obtain business

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UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS

General Certificate of Education Ordinary Level

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