1.15 Assessing business start-ups Mark schemex

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AQA BUSS1 Planning and Financing a

Business

www.time2resources.com


Starting a Business
-

1.1
5 A
ssessing business start
-
ups



Mark Scheme




1a

What is meant by the term
“business objectives”





(2 marks)



Definition:

clearly defined targets (
1 mark
) for a business to achieve over a certain time period

(
1 mark
)




1b

What is meant by the term
“break
-
even”
?






(2 marks)



Definition:

when the level of output or number of customers (
1 mark
) earns enough revenue to cover
total costs of production (
1 mark
).




1c

Explain two strengths of Carla’s business idea.





(
5

marks)



Level

Descriptor

Marks

L3

Good application

5

L2

Good knowledge
or


Reasonable application

4
-
3

L1

Limited knowledge

2
-
1


Definition
: The identification of a concept for a new business start
-
up




Carla is experienced as
a machinist making high quality garments



Market research shows that there is only limited competition with one competitor in a
neighbouring town



Primary research shows that half of the customers asked would be willing to use her services
on a regular basis




1d

Explain why Carla’s second objective would not be considered S.M.A.R.T.

(6

marks)




Level

Descriptor

Marks

L3

Good application

6
-
5

L2

Good knowledge
or


Reasonable application

4
-
3

L1

Limited knowledge

2
-
1



Definition:

S.M.A.R.T objectives are Specific, Measurable, Agreed, Real
i
stic and Time specific.





It is not measurable; impossible to measure reputation although quality could be.



May not be realistic; Carla has never run her own business and has decided not to
advertise
but rely on word of mouth.



There is no time

frame given as to when this will be achieved.



AQA BUSS1 Planning and Financing a

Business

www.time2resources.com



2a

Analyse the
opportunity costs

to Carla of

starting

Carla Clothing
.


(10

marks)




Level

Descriptor

Marks

L5

Good application
AND

Good analysis

10
-
9

L4

Good application
AND

Reasonable analysis

or

Good analysis
AND

Reasonable application

8
-
7

L3

Reasonable application
AND

Reasonable analysis

or

Good application

o
r

Good analysis

6
-
5

L2

Knowledge
AND

Reasonable application

or

Knowledge
AND

Reasonable analysis

4
-
3

L1

Knowledge

2
-
1


Definition:


the cost of an activity expressed in terms of the next best alternative, which has to be
given up when making a choice.




She has a job earning £15 000 a year that she would have to
leave

-

security
.



She enjoys her job and the company of her colleagues.



Now only a five minute walk to work; would change to a fifteen minute drive.



She is investing her inheritance in the business which may fail.




2b

Do you consider that
Carla Clothing

will ac
hieve its
two main objectives?


Use calculations

to
support your view.






(15

marks)




Level

Descriptor

Marks

L5

Good application
AND

Good analysis

10
-
9

L4

Good application
AND

Reasonable analysis

or

Good analysis
AND

Reasonable application

8
-
7

L3

Reasonable application
AND

Reasonable analysis

or

Good application

o
r

Good analysis

6
-
5

L2

Knowledge
AND

Reasonable application

or

Knowledge
AND

Reasonable analysis

4
-
3

L1

Knowledge

2
-
1



AQA BUSS1 Planning and Financing a

Business

www.time2resources.com


To break
-
even during the first year of trading
make a

profit in subsequent years.


Break
-
even point is £30 000/(£100
-
£50) = £30 000/£50 = 600 garments.




Carla has estimated that she would produce 500 to 600 garments in her first year of trading so
she would break
-
even if she achieved the top end of this esti
mate.



Carla has also estimated that she would produce 600 to 700 garments in future years. At the
lower end of this estimate she would break
-
even and would just have her salary of £10 000
when she earns £15 000 in her current job. At 700 garments she w
ou
ld make a profit of
£5 000 in addition to her £10 000 salary. So, at the top end of her estimate she would be profit
satisficing.
BUT



Figures are only estimates (she is inexperienced) and her market research is limited.



Is it possible to reach the

top end of her estimates when she is not spending anything on
advertising and relying on word of mouth?


To establish a reputation for the highest quality bespoke garments in the local area.




Carla is an experienced machinist who produces the highest qual
ity garments very speedily;
she has the skills necessary.



There is only one competitor in the area;
in
the next town.
BUT



Not a S.M.A.R.T objective; difficult to measure



Is not intending to advertise and rely just on word of mouth.



Market research limited
.


Evaluation


It may be possible to achieve t
he break
-
even/profit

objective and Carla has the skills to produce high
quality garments but she is inexperienced at running a business, has undertaken limited market
research and is reluctant to advertise.


For Evaluation,

you should award marks using the grid below.


Note
: Evaluation also assesses candidates’ quality of written communication. When deciding on the
level to be awarded, consider the degree to which the candidate orders his/her ideas.



Level

D
escriptor

Marks

E3

Judgement with well supported justification.


Answer has a logical structure throughout with effective use of technical terms.

5
-
4

E2

Judgement with limited attempt at justification.


Evidence of a logical structure and some use of
technical terms.

3
-
2

E1

Assertion or judgement which is unsupported.


Limited evidence of a logical structure and little use of technical terms.

1