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March 2020 IGCSE Business Studies Paper 1 Solution CAIE

Cambridge International Examinations IGCSE Business Studies Paper 1 Solution with answers for every question and video exam technique tutorial. You can download the past paper by clicking on the link.

You can find details of how to improve your paper 2 technique here, and further paper 1 past paper solutions here

1. HSN Breakfast Cereals

1 HSN uses batch production to make breakfast cereals. The products are sold using several distribution channels. HSN employs 600 production workers. HSN has problems with many employees leaving. Following the dismissal of the Operations Manager, the Human Resources Director has to recruit a new manager. She said: ‘The person must have good communication skills to help solve the communication barriers HSN has with employees.’ The Human Resources Director has to decide whether to use internal recruitment or external recruitment for the new manager.

(a) Define ‘dismissal’.

When employee is fired by a business because their work or behaviour is not up to standard.

(b) State two distribution channels a business might use. [2]

Distribution channel 1:

Wholesaler

Distribution channel 2:

Retailer

(c) Outline two possible problems to HSN of many employees leaving. [4]

Problem 1

Disruption to production of breakfast cereals

Problem 2

Takes managers time away from other aspects of the business such as reducing communication barriers

d) Explain how each of the following could cause communication barriers within HSN. [6]

Language

Use of technical terms when using batch production so employees may not understand the message

Medium of Communication

The wrong channel may be used so all if the 600 employees may not be able to access the message if they send a message by email and not all workers have access to a computer

(e) Do you think external recruitment is better than internal recruitment when recruiting a new manager for a large business? Justify your answer.

No because external recruitment might be more expensive which will increase costs

Yes because, the business might have no choice as there may not be suitable internal applicants.

So, there may be no new ideas which could increase efficiency. Although a higher cost, using external recruitment would be better as it will result in the appointment of a manager whose cost savings will soon outweigh the cost of external recruitment, especially in a large business where there is much more opportunity for cost savings.

2. Gomez Sole Trader

  1. Gomez is a sole trader. He provides painting and decorating services to business customers. His business does not benefit from any economies of scale because it is small. Gomez has to pay his suppliers within 1 month. However, he gives customers 3 months to pay. Gomez uses an old van he has borrowed from his father to travel to his customers’ offices and shops. As the van often breaks down, Gomez is thinking of buying a new van. A cash-flow forecast for the next 3 months is shown in Table 2.1.

(a) Define ‘economies of scale’. [2]

Factors that lead to lower average costs as a business increases in size

(b) Calculate X and Y. [2]

X=400

Y= 2400

(c) Outline two factors Gomez should consider when choosing a source of finance for the new van. [4]

Factor 1

How much it will cost as he only has $600 cash available

Factor 2

Size of business may be viewed as a higher risk as he is a sole trader

(d) Explain one advantage and one disadvantage to Gomez of being a sole trader. [6]

Advantage

Keeps all the profit

Explanation

So if successful will make more money/will encourage him to do better from painting business

Advantage

Unlimited liability

Explanation

so if business is not able to pay the suppliers within 1 month could lose his personal possessions

(e) Do you think asking customers to pay more quickly is the best way for a small business to improve its cash-flow? Justify your answer. [6]

Yes because there will be no need to borrow so no interest paid so does not increase cash outflows. No because customers may be unable or unwilling to pay more quickly so may look for alternative suppliers so reducing cash inflows. As the business is small, it may be better to ask suppliers for more time to pay as the business may not have many customers so does not want to risk losing them by asking them to pay more quickly.

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