Paper 2 Nov 2007 Com
Paper 2 Nov 2007 Com
Paper 2 Nov 2007 Com
7100 COMMERCE
7100/02 Paper 2 (Written), maximum raw mark 80
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began.
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 discussions or correspondence in connection with these mark schemes.
CIE is publishing the mark schemes for the October/November 2007 question papers for most IGCSE,
GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level
syllabuses.
Page 2 Mark Scheme Syllabus Paper
GCE O LEVEL – October/November 2007 7100 02
(d) Any six points x 1 mark and up to 3 marks for a well developed point –
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Page 3 Mark Scheme Syllabus Paper
GCE O LEVEL – October/November 2007 7100 02
E.g. The manufacturer could continue to use a wholesaler because he will be able to clear his
production lines so enabling him to continue manufacturing. He will transfer the risk of non-
sales to the wholesaler and will be saved large storage costs. He will also be saved some
marketing costs i.e. selling to individual retailers and will probably be able to sell bulk
quantities. On the other hand he may not receive so much money for the furniture as he
would by selling direct to the retailer.
By selling direct to the retailer the manufacturer will omit the middleman, so saving costs. He
will probably incur extra costs e.g. transport to retailers and may be selling in smaller
quantities. If he transports the furniture himself it is less likely to be damaged as it would be
under the direct supervision of his own employees. He will also be able to charge higher
prices as he is offering some of the services given by wholesalers e.g. packaging, small
quantities, so he may make more profit. He may, however, have to offer considerable trade
discount if he is selling to large-scale retailers. He can also push the sales of his own
particular furniture.
I would recommend that he sells direct to the retailer but he may incur extra costs such as
making particular items for individual retailers. His furniture is less likely to be damaged and
he will receive regular feedback about customer tastes from the retailer. He could also
consider opening his own retail outlet.
E.g. The manufacturer could continue to use a wholesaler because it would save him work. He
would be delivering to one wholesaler instead of a number of retailers. He may not make as
much money. If he sells direct to retailers his goods may arrive quicker but he will have to
negotiate individual sales with individual retailers. He should continue to use a wholesaler
who will save some of his storage costs.
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Page 4 Mark Scheme Syllabus Paper
GCE O LEVEL – October/November 2007 7100 02
(b) Any two differences x 2 marks each but allow different features –
E.g. Many people now use supermarkets rather than small shops for their food and household
goods because it allows them to do one-stop shopping and to buy large quantities of goods
to last for some time. They are able to use self service so that they can examine the goods
and shop at their own pace without pressure from sales staff. They are offered a wide range
of goods at competitive prices and this helps shoppers on tight budgets. Because of the high
turnover, the goods are likely to be fresher and also packaged and branded for easy
recognition. They are also offering many of the services that small shops are known to
provide – delivery of goods, specialist counters within the store e.g. bakery.
(On the other hand many people still prefer to use small independent shops. They value the
personal service and the quality of the goods sold. There may be no supermarket available
in their locality and they prefer to shop daily rather than weekly. They may also be allowed
informal credit whereas the supermarket may accept credit cards.)
It is likely that shoppers will use supermarkets for their bulk shopping if a supermarket is
available but that they will use specialist shops e.g.Sunshine Bakery for bread and also use
One-Stop Stores when the supermarket is closed.
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GCE O LEVEL – October/November 2007 7100 02
E.g. Many people use supermarkets because they offer self service, they offer lower prices and
they enable shoppers to buy branded goods easily. Supermarkets do not offer informal
credit but many of them accept credit cards. Supermarkets do not offer personal service.
They also do not deliver. I think that many people prefer using supermarkets because they
provide easier shopping but in many parts of the world there are no supermarkets.
(d) Any three points x 1 mark each or up to three marks for a well developed point –
(e) Any four points x 1 mark each or two well developed points x 2 marks which may be for or
against accepting credit cards or a mixture of both. No marks for the opinion.
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GCE O LEVEL – October/November 2007 7100 02
E.g. Mrs Lim owns a small business so television would not be appropriate as it is very expensive
and appeals to a mass audience. Mrs Lim’s business probably operates in a small area and
offers various services. She needs an advertising method that is reasonably priced as she is
likely to be on a limited budget. She wants to be able to give information about the services
she provides so that people can refer to the information when they want to. She may also
consider other advertising media which are also cheap such as leaflets.
E.g. Television is very expensive. It would give visual display of Mrs Lim’s services. I would
recommend local newspapers. They cover the area where Mrs Lim is located. They are
cheaper than television. She can advertise regularly.
E.g. Television is expensive. The advert would be seen for only a few seconds. Newspaper
adverts give details. They may be grouped on a particular page. [6]
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Page 7 Mark Scheme Syllabus Paper
GCE O LEVEL – October/November 2007 7100 02
(c) Any three points x 1 mark each either for or against or both –
Arguments against –
May not have the skills to set it up
May be costly to set up
Customers may not use it
Competitors can access it to see what Mrs Lim is offering
Increases complaints
(d) Any one method of communication x 1 mark + two marks for reasons for use –
(NB Speed, ease of use, cheapness, 0 marks unless qualified)
(e) Any four benefits x 1 mark each or two benefits well developed x 2 marks each –
(NB candidates must score at least one mark on cash or trade discount to obtain full marks)
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Page 8 Mark Scheme Syllabus Paper
GCE O LEVEL – October/November 2007 7100 02
(b) Exports = $30 000 + $15 000 + $10 000 + $5 000 + $15 000 + $15 000 (1 mark)
= $90 000 (1 mark)
-
Imports = $10 000 + $5 000 + $10 000 + $20 000 + $15 000 + $5 000 (1 mark)
= $65 000 (1 mark)
OFR applies. If the correct answer is given without working, award 5 marks, i.e. no
conclusion [6]
(c) Any six points x 1 mark each and up to 3 marks for a well developed point –
NB the customs authority may be in the home country or the countries to which the country
exports
keeping statistical records of imports and exports – to help the government calculate its
balance of trade and balance of payments and assess its trade policies and calculate its tax
revenue from import duties
collecting revenue from import duties – may be ad valorem or specific controlling bonded
warehouses – to enforce the payment of duties. Bonded warehouses provide storage for
dutiable goods on which duty is unpaid
supervising the movement of goods across the country’s borders – preventing smuggling,
inspecting cargoes, inspecting documents, enforcing embargoes
enforcing quotas - physical limits on amount of goods allowed to be imported to prevent
dumping
may cover immigration – control of people entering the country
may cover quarantine regulations – for animals
enforcing public health regulations – preventing certain goods being imported e.g. food
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Page 9 Mark Scheme Syllabus Paper
GCE O LEVEL – October/November 2007 7100 02
E.g. Containerisation has become increasingly important in international trade. Many goods are
able to be transported in containers, standard sized metal boxes, that protect goods from
damage and from theft. This means the reduction in insurance costs and packaging costs.
Containers enable goods to be packed at the factory, taken to docks or airports and
transported without unpacking until they reach their destination. Containers act as
warehouses so reducing storage costs. Customs clearance can take place at the factory
again making for quicker processing. Containers can be stacked so saving dock-side space.
They can be transhipped using air, sea, rail or road transport so saving money and
manpower. Special unloading equipment has been devised so loading and unloading is
quicker so making for quicker and cheaper turnaround of transport. Several kinds of goods
can be packed in one container (groupage) again saving transport costs.
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Page 10 Mark Scheme Syllabus Paper
GCE O LEVEL – October/November 2007 7100 02
A loan is a formal method of borrowing from a bank. It is taken for a fixed amount at a fixed
interest. A loan account is opened which credited with the amount borrowed and instalments
are debited from the current account. Interest rates are usually lower than for an overdraft.
An overdraft is usually used to pay unexpected bills or to help with cash flow. The business
must have a current account and interest is charged daily on the amount overdrawn. The
overdraft is payable at 24 hours notice.
E.g. Mr Wong will need a loan to build new premises as he will require a large amount of money
and he has a definite purpose. He will also need an overdraft because he is likely to be
buying on credit for the stock and equipment and will need instant finance to pay his bills and
take advantage of cash discounts. I would recommend that he apply for both forms of
finance.
NB if reasoned recommendation of loans only 5 max.
E.g. Features mentioned as listed in Level 3. I would recommend that Mr Wong should have a
loan because he needs a large sum of money and the bank will not lend so much with an
overdraft.
E.g. A few features as in Level 3 listed e.g. Mr Wong needs a current account for an overdraft.
He pays interest on the daily balance overdrawn. I recommend an overdraft. [6]
(b) (i) Any two means of payment x 1 mark each + 1 mark each for description –
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GCE O LEVEL – October/November 2007 7100 02
(ii) Any two means of payment x 1 mark each + 1 mark each for description -
(c) Any six points x 1 mark each and up to 3 marks for well developed points –
(List of services = 3 max.)
use of credit cards – postponed payment, payment settled monthly, can be paid using the
Internet or by telephone
use of standing orders and more particularly direct debit – (count as two services)
preferred by creditors as they request payment and can avoid bad
debts, enables them to computerise their billing and collect money
electronically
use of debit cards – immediate payment at point of sale, trader assured of payment, no
cash or cheques involved
Internet banking – can transfer funds between accounts, pay bills without using cash,
available 24 hours a day
telephone banking – can transfer funds between accounts, pay bills without using cash, pay
credit card bills
use of bank giro – to pay wages, safer than paying by cheque or with cash
use of ATM – for other services besides cash
ATM + cash = 0
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Page 12 Mark Scheme Syllabus Paper
GCE O LEVEL – October/November 2007 7100 02
Insurance companies manage the pool. There must be sufficient funds to cover costs and
claims. The insurance premium is small compared with the amount insured, but if the risk is
great, the insurance premium will be high. If not many people want to cover a risk, the
premium may also be high. The value of what is to be insured also affects the level of the
premium. So the statement is in part correct, the central pool from which claims are made
does affect the level of the insurance premium because financial loss is shared
among a large number of people. It is also affected by the degree of risk involved.
Pooling of risk is the level of funds from which compensation is paid. Insurance premiums
are payments for insurance cover. The amount of premium paid is affected by the amount of
risk involved. Financial loss is shared among a large number of people who help to pay the
claims. I agree with the statement because this enables premiums to be kept low.
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Page 13 Mark Scheme Syllabus Paper
GCE O LEVEL – October/November 2007 7100 02
risk is calculated from past records so that the insurance premium can be set
the higher the risk, the greater the premium
some risks are uninsurable
e.g. bad management
because there are no past records
and the risk in incapable of being measured
OR utmost good faith when completing proposal form from which insurance company
calculates risk [3]
indemnity (1) – means to restore a person to the position that he was in before the event
concerned took place
no one is allowed to make a profit out of a loss
life assurance and personal accident are not contracts of indemnity because
the claimant cannot be restored to the former position
no one is allowed to insure the same risk with two insurance companies in
order to make a profit (contribution)
no one can be compensated and then retain rights to the property
compensated for (subrogation)
example
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Page 14 Mark Scheme Syllabus Paper
GCE O LEVEL – October/November 2007 7100 02
E.g. Site A is close to a large town and on the road to a highway so there should be plenty of
customers. Site A is an existing garage so it may not need so much alteration as Site B. It
is, however, more expensive than Site B but we do not know the purchase price or why the
owner is selling. There are two other garages within a short distance from this site and they
may be competitors.
Site B is on a road between two large centres of population. It is at the junction of two roads
so there may be passing traffic for fuel sales. It is cheaper than Site A but we do not know
the purchase price. As it was an old factory site, it likely to be in a rundown condition and
may have to be demolished and rebuilt. This is likely to take some time and so there will be
no profits made from the garage for some time. It could, however, be purpose built. There is
also another garage within 3 km of the site.
I would recommend buying Site A as it may not need too much refurbishment.
I would need to know the size of the site and whether or not it is suitable for selling fuel
before I could make a final decision.
I would need to know the price of each site.
Site B is cheaper but the purchase price is unknown. It will need a great deal of
redevelopment as it was an old factory site. It is on the corner of two roads and close to two
towns. It should attract passing trade. There is another garage close by.
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GCE O LEVEL – October/November 2007 7100 02
(b) Any four points x 1 mark each and up to four marks for a well developed point – (max 2
sources of finance)
forming a private limited company – so that he can have shareholders who will invest in the
business
taking a bank loan – fixed interest, providing collateral in the form of the garages he already
owns
taking a partner – who will invest in the business. May be a sleeping partner who invests but
takes no part in the business
selling fixed/personal assets
mortgaging existing garages
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Page 16 Mark Scheme Syllabus Paper
GCE O LEVEL – October/November 2007 7100 02
(d) Any two advantages x 1 mark each and two disadvantages x 1 mark each –
Advantages – own boss easy to set up
Flexibility quick decision making
lower tax burden accounts private
personal incentive to succeed
personal supervision of employees
Disadvantages – limited capital unlimited liability
lack of continuity difficult to take time off
problems of cover at work when ill
have to be skilled at all aspects of the business
Any other relevant point [4]
8 (a) Any four points x 1 mark each or two well explained points x 2 marks –
office machinery is valuable and so is able to bear the cost of air transport
it needs to be handled with care and air transport provides speedy transport
sand and timber are bulk cargoes with low value
air transport would be too expensive
but sea transport can carry them in bulk
there is probably no urgency for delivery
Any other relevant point [4]
(c) Any four points x 1 mark each or two well developed points x 2 marks –
provides storage such as bonded warehouses
provides office space from which Rahman Enterprises Ltd could operate
provides waterways to enable ships to dock e.g. pilot services
provides unloading facilities for Rahman Enterprises Ltd’s goods e.g. wharves, quays
provides facilities for handling containers
by providing an efficient service, it speeds the movement of imported/ exported goods
by offering ship repairs
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Page 17 Mark Scheme Syllabus Paper
GCE O LEVEL – October/November 2007 7100 02
E.g. There are several reasons why Rahman Enterprises Ltd should own its own cargo plane. It
might be cheaper in the long run, although the cost of purchase may be prohibitive. It will
give the company greater flexibility to operate when it wants to, go wherever it has business
and handle cargo more safely. It can be used as an advertising tool – its own logo on the
side of the plane. The company would not be restricted by unavailability of planes and
so may be able to undertake more business.
On the other hand, the cost of purchasing and maintaining a cargo plane will be enormous.
The company may have more business than can be handled by one plane or may have
insufficient business at certain times. The company will also have to pay pilots and ground
staff, pay landing charges and have a home airport.
To make a more informed decision, I would need to know what volume of goods is carried by
air, to what destination, what other airlines charge and what difficulties have been
encountered in the past. I would recommend that the company does not purchase a cargo
plane. A better option might be to lease one plane and see what difficulties are encountered.
E.g. The company may find that owning a cargo plane has some benefits such as being able to
operate when you want to and giving more personal service to customers. They may be able
to cut charges to customers. This will bring more business. The disadvantages are the high
cost of buying a plane, the running costs and having to organise when and where it flies. I
would recommend that the company buys a cargo plane to carry its goods.
E.g. Has listed some points for and against buying a cargo plane and may/may not have made a
recommendation.
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