™

Cambridge IGCSE

BUSINESS STUDIES 0450/13

*8417120905*

Paper 1 Short Answer and Data Response May/June 2020

1 hour 30 minutes

You must answer on the question paper.

No additional materials are needed.

INSTRUCTIONS
• Answer all questions.
• Use a black or dark blue pen. You may use an HB pencil for any diagrams or graphs.
• Write your name, centre number and candidate number in the boxes at the top of the page.
• Write your answer to each question in the space provided.
• Do not use an erasable pen or correction fluid.
• Do not write on any bar codes.
• You may use a calculator.

INFORMATION
• The total mark for this paper is 80.
• The number of marks for each question or part question is shown in brackets [ ].

This document has 12 pages. Blank pages are indicated.

06_0450_13_2020_1.12
© UCLES 2020 [Turn over
 2

1 RGP owns a number of luxury hotels. The directors are planning to open a new hotel with 200
rooms. The hotel’s location will be in the city centre. The Human Resources Director said: ‘One of
my roles is to recruit the 300 employees RGP will need from the local community. I think selecting
new employees with the right personality is more important than their experience. Everyone will
have 6 weeks of induction training.’ She knows that effective communication between employees
and customers will be important to the success of the hotel.

(a) Define ‘induction training’.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [2]

(b) Identify two ways a business could advertise a new job vacancy.

Way 1: ...............................................................................................................................

...........................................................................................................................................

Way 2: ...............................................................................................................................

........................................................................................................................................... [2]

(c) Outline two reasons why effective communication between RGP’s employees and customers
is important.

Reason 1: .........................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

Reason 2: .........................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [4]

© UCLES 2020 06_0450_13_2020_1.12

 3

(d) Explain one advantage and one disadvantage to RGP of choosing a location in the city centre.

Advantage: .......................................................................................................................

...........................................................................................................................................

Explanation: ......................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

Disadvantage: ...................................................................................................................

...........................................................................................................................................

Explanation: ......................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [6]

(e) Do you think selecting employees with the right personality is more important than their
experience for a tertiary sector business? Justify your answer.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [6]

© UCLES 2020 06_0450_13_2020_1.12 [Turn over

 4

2 RVC uses batch production to manufacture a large range of products including soap and shampoo.
Many of the products are at different stages of the product life cycle. The Marketing Director has
been reviewing some data for one brand of soap, as shown in Table 2.1. She said: ‘Last year sales
were 80 000 units a week. I want to know the current level of profit and margin of safety.’ The
Marketing Director has to decide on a suitable extension strategy. The choice is between new
packaging or targeting new markets.

Table 2.1
Cost, price and sales data for one brand of RVC’s soap

Selling price $2.50

Fixed costs per week $20 000

Average variable costs $0.90

Number of sales per week 40 000

(a) Define ‘margin of safety’.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [2]

(b) Identify two stages of the product life cycle.

Stage 1: ............................................................................................................................

Stage 2: ............................................................................................................................ [2]

(c) Using Table 2.1, calculate the weekly profit. Show your working.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [4]

© UCLES 2020 06_0450_13_2020_1.12

 5

(d) Explain one benefit and one limitation to RVC of using batch production.

Benefit: .............................................................................................................................

...........................................................................................................................................

Explanation: ......................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

Limitation: .........................................................................................................................

...........................................................................................................................................

Explanation: ......................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [6]

(e) Do you think targeting new markets is a better extension strategy than new packaging for a
manufacturing business ? Justify your answer.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [6]

© UCLES 2020 06_0450_13_2020_1.12 [Turn over

 6

3 PCS is a multinational company in the private sector. It makes 500 brands of soft drinks which are
sold in plastic bottles. PCS has a large marketing budget for promotion. Many of the countries
where PCS sell its products have introduced legal controls to reduce the amount of litter (trash).
PCS plans to start recycling plastic bottles. PCS’s Operations Manager said: ‘Everything has an
opportunity cost. We want to protect the environment but recycling costs money.’

(a) Define ‘opportunity cost’.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [2]

(b) State two features of a private sector business.

Feature 1: .........................................................................................................................

...........................................................................................................................................

Feature 2: .........................................................................................................................

........................................................................................................................................... [2]

(c) Identify four aims of promotion.

Aim 1: ...............................................................................................................................

...........................................................................................................................................

Aim 2: ...............................................................................................................................

...........................................................................................................................................

Aim 3: ...............................................................................................................................

...........................................................................................................................................

Aim 4: ...............................................................................................................................

........................................................................................................................................... [4]

© UCLES 2020 06_0450_13_2020_1.12

 7

(d) Explain two advantages to PCS of being a multinational company.

Advantage 1: ....................................................................................................................

...........................................................................................................................................

Explanation: ......................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

Advantage 2: ....................................................................................................................

...........................................................................................................................................

Explanation: ......................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [6]

(e) Do you think all manufacturing businesses should use recycled materials? Justify your answer.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [6]

© UCLES 2020 06_0450_13_2020_1.12 [Turn over

 8

4 LXA is a private limited company based in country Z. It makes children’s clothing. LXA sells its
products in competitive markets in several countries. LXA’s directors are considering different ways
for the business to grow. The Finance Director has prepared some financial information before
meeting with some of LXA’s stakeholders. An extract is shown in Table 4.1. The Marketing Director
wants LXA to start producing clothing for adults.

Table 4.1
Extract of LXA’s financial data

2019 2018

Working capital ($000) 180 200

Acid test ratio 0.5 0.7

Return on Capital Employed

6% 8%
(ROCE)

Gross profit margin 20% 25%

(a) Define ‘Return on Capital Employed’.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [2]

(b) Define ‘working capital’.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [2]

© UCLES 2020 06_0450_13_2020_1.12

 9

(c) Outline two possible problems for LXA if the business grows.

Problem 1: ........................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

Problem 2: ........................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [4]

(d) Explain one way each of the following stakeholder groups might use LXA’s financial information.

Suppliers: ..........................................................................................................................

...........................................................................................................................................

Explanation: ......................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

Shareholders: ...................................................................................................................

...........................................................................................................................................

Explanation: ......................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [6]

© UCLES 2020 06_0450_13_2020_1.12 [Turn over

 10

(e) Do you think a business should use the same marketing mix to sell its products to different
age groups? Justify your answer.

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

...........................................................................................................................................

........................................................................................................................................... [6]

© UCLES 2020 06_0450_13_2020_1.12

 11

BLANK PAGE

© UCLES 2020 06_0450_13_2020_1.12

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable
effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will
be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge Assessment
International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 06_0450_13_2020_1.12