Gemini Theatre (GT) GT is a private limited company fully owned by the Gemini family. It owns a small theatre. This building is used to show live stage performances. Some of the performances are created by GT and some are created by visiting groups who rent the theatre. Table 2.1 shows the planned performances for January 2021. Table 2.1: Planned performances for January 2021 Name of performance | Created by | Number of performances | Ticket price | Percentage of tickets sold A Summer Dream | Visiting group | 9 | $40 | 100% Wise Owl | GT | 14 | $15 | 60% La Poeme Ballet | GT | 5 | $20 | 40% GT gains all the revenue from performances created by GT. Visiting groups must pay 50% of their total ticket revenue to GT. The theatre has a maximum of 250 tickets that can be sold for each performance. GT uses cost-based pricing to set each ticket price for its own performances. Each performance makes a profit but the company often experiences cash flow problems. GT needs to recruit a new Theatre Manager. The person hired will have many duties, including the responsibility for all of GT's administration as well as some accounting. The Directors are considering two people who were both recently interviewed. Table 2.2 contains information gained from the interview process. Table 2.2: Information gained from the interview process Nick • Three years working for a similar theatre business • A Levels in Business, Art and Chinese • Very organised and efficient • No management experience • Wants to move overseas in the future Portia • Eight years working as a manager for a bank • No formal qualifications • Late for the interview • Good sense of humour • Looking for a long-term career

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2020). The mark or mark type is shown in brackets.

1. [2] A correct definition should include the following elements (allow one mark for each element): An amount is added on to give the amount the customer must pay (1) Based on the cost to produce a product (1)
2. [2] The business works out how much it costs to make a product and then adds on a set percentage.
3. [1] Adding on to the costs.
4. [1] Cost-based pricing means pricing a product based on the costs of production.
5. [1] A Understanding of cash
6. [1] B Understanding of profit
7. [1] C Explanation of the difference between cash and profit
8. [3] A business is unlikely to operate without cash but can operate without profit (C).
9. [3] Cash can be used to pay the business costs (A) whereas profit is the difference between costs and revenue (B).
10. [2] Cash can be used to pay the business costs (A). Profit is the difference between costs and revenue (B).
11. [Content] Cash is the liquidity of a firm – the money available to pay debts/bills/everyday costs
12. [Content] Profit is the difference between cost and revenue.
13. [Content] Cash is required and will come from revenue, but not all cash is profit as costs need to be paid.
14. [Content] Cash is an asset of the business.
15. [Content] Cash is required to run a business, whereas profit is something to aim for.
16. [Content] A business is unlikely to operate without cash but can operate without profit.
17. [3] Correct answer with or without correct working or $
18. [2] Correct calculation of TR
19. [1] Correct use of numbers
20. [3] Formula: $40 × (250 tickets × 9 performances) = $40 × 2250 = $90 000 (TR)
21. [3] 50% of revenue to GT = $90000 / 2 = $45 000
22. [3] Answer = $45 000
23. [3] OFR
24. [2] Candidate has missed out the number of seats – however, all the other stages of the calculation have been completed correctly (OFR).
25. [2] Candidate has missed out the number of performances – however, all the other stages of the calculation have been completed correctly (OFR).
26. [3] Explanation of an advantage of renting the theatre to visiting groups in context
27. [2] Explanation of an advantage of renting a capital item
28. [1] Identification of an advantage of renting a capital item
29. [Content] Reduces the risk of operating the theatre
30. [Content] Reduces the average cost of productions (fixed costs are spread over more performances)
31. [Content] May advertise GT performances at a visiting group
32. [Content] Makes use of a redundant resource/capital item
33. [Content] Increases GT's usage of the theatre
34. [Content] Increases GT's cashflow
35. [APP] Advertises the theatre. Which may bring in more customers to a GT show. For example, GT can advertise Wise Owl during the performances of A Summer Dream.
36. [APP] Spreads fixed costs. Because the extra performances can be allocated some of the fixed costs. Such as upkeep of the building.
37. [4] Shows understanding of two factors affecting demand in context
38. [4] Good analysis of two factors affecting demand in context
39. [3] Shows understanding of one factor affecting demand in context
40. [3] Good analysis of one factor affecting demand in context
41. [2] Shows knowledge of two factors affecting demand
42. [2] Limited analysis of two factors affecting demand
43. [1] Shows knowledge of one factor affecting demand
44. [1] Limited analysis of one factor affecting demand
45. [0] No creditable content
46. [Content] Changes in income – being a normal/luxury product, consumers are likely to increase spending on GT performances based on increasing income.
47. [Content] Fashions/trends/tastes/preferences – going to the theatre may become fashionable, or may become a new trend
48. [Content] Advertising - if GT spend on advertising, then it is likely to increase demand for their performances
49. [Content] Brand awareness
50. [Content] Price of substitutes/complements
51. [Content] Availability of substitutes/compliments (for example Netflix, Amazon, other theatres)
52. [Content] Population size
53. [Content] Quality
54. [Content] Uniqueness (USP)
55. [Content] Price - likely to be an increase in QD if price falls and vice versa.
56. [K] Tastes of customers (K)
57. [APP] prefer A Summer Dream to La Poeme Ballet (APP)
58. [AN + DEV] Which means that more tickets were sold for A Summer Dream (AN) and this gains GT more profit (DEV)
59. [K] Income (K)
60. [APP] Theatre tickets are likely to be a luxury good (APP)
61. [AN + DEV] Which means that the higher the income the more tickets GT will sell (AN) and the more profit GT will make (DEV)
62. [7] Justified recommendation based on argument in context
63. [6] Developed recommendation based on argument in context
64. [5] A recommendation / evaluative statement based on argument in context
65. [4] Shows understanding of two factors of selection in context
66. [4] Argument based on factor(s) affecting the selection of Nick and Portia
67. [3] Shows understanding of one factor of selection in context
68. [3] Argument based on factor(s) affecting the selection of Nick or Portia
69. [2] Shows knowledge of two factors of selection
70. [2] Limited analysis of factor(s) affecting the selection of Nick and Portia
71. [1] Shows knowledge of one factor of selection
72. [1] Limited analysis of factor(s) affecting the selection of Nick or Portia
73. [0] No creditable content
74. [Content] Nick: Experience in the sector (three years for a similar business) / A-Level in Business – helps with the admin / Organised and efficient – helps with the admin / No management experience – so will he be able to do the job? / May not stay for long
75. [Content] Portia: Eight years of experience in a bank – helps with finance / Good sense of humour – likely to help in job / Likely to stay for a long time / No formal qualifications – but is this made up for by the bank experience? / Late for the interview – does this suggest she is disorganised – however worked for the bank for eight years
76. [K] Experience (Κ).
77. [APP] Nick has appropriate theatre experience, which means he knows what to do (APP).
78. [AN] That could mean that GT has to pay less training costs if they hire Nick (ΑΝ).
79. [DEV] Leading to a better chance for GT to make profit (DEV)
80. [EVAL] Nick is the better person to employ (EVAL) because experience in a theatre is more important than personality in a job that requires administration and accounting (EVAL). However, this might depend on how complex the accounting is as Portia's banking experience might make her the better employee (EVAL).
81. [K] Personality (K)
82. [APP] Portia has a good sense of humour making her easier to work with (APP).
83. [AN] Which may mean that GT attracts more visiting theatre companies (AN).
84. [DEV] Which may lead to an increase in revenue for GT (DEV).