During May, a fruit and vegetable shop has a turnover of $50000. The mark-up is 25% on purchases made mostly from wholesalers.

Mark scheme

Marking points from the official mark scheme (May/June 2012). The mark or mark type is shown in brackets.

1. [2] (a) Total value of sales/income/revenue for a trading period (1)/total sales (1)
2. Calculated as total sales less returns (2).
3. Net sales = 2 marks.
4. Any other relevant point.
5. [2] (b) (i) $50 000 × 100/125 (1 mark) = $40 000 (1 mark)
6. OFR applies. Award full marks for correct answer without working.
7. [3] (b) (ii) $50 000 – $40 000 (1 mark) = $10 000 – $6000 (1 mark) = $4000 (1 mark)
8. OFR applies and also from (i) above.
9. Award full marks for correct answer without working.
10. [3] (c) Any three points × 1 mark and up to 2 marks for a well developed point:
11. because fruit and vegetables are perishable
12. and so need to be sold quickly
13. do not want the problem of rotting fruit and vegetables
14. may otherwise waste resources/lose money
15. will mean increased sales leading to higher profits
16. daily necessities for consumers/buying daily.
17. Any other relevant point.
18. Comment on cash flow up to two marks.
19. [4] (d) Any two services described relating to the fruit and vegetable shop × 2 marks:
20. NB if services not in context award 1 mark each.
21. buying bulk quantities from producers and breaking that bulk into small quantities
22. selling to the shop in the quantities of fruit/vegetables required
23. providing storage e.g. cold storage until shop requires stock
24. delivery of fruit and vegetables to the shop using a van probably daily
25. providing a variety of fruit and vegetables so that the shopkeeper does not have to visit several suppliers
26. offering trade discount so that the shopkeeper can make a profit
27. storing produce that may be produced seasonally and for which there is continuous demand e.g. apples
28. taking risk of bearing losses for produce that is unsold
29. offering credit.
30. Any other relevant point.
31. [6] (e) Level 2 (4-6 marks)
32. Has discussed more than one medium and promotion and given a reasoned recommendation with/without comment on the others listed. (If a candidate has given a reasoned recommendation for only one medium or promotion, award 4 marks max.)
33. The fruit and vegetable shop owner could use all the advertising media and promotion methods but not all at the same time. He will need to advertise the shop as it has newly opened and so posters and advertisements in local newspapers would be appropriate as they are relatively cheap, can be colourful and are targeted at local customers. He is likely to put displays of produce outside the shop as these will attract passing trade. He may not offer more than one promotion at a time. Loss leaders – selling one line at cost or at a loss in order to entice consumers to buy other lines would be a good idea for the new shop as he needs to build up trade. This could be followed by buy one, get one free promotions on certain lines but people may only want certain quantities of fruit and vegetables at any one time so this may not work as well as for other types of business. I would recommend that the owner of the fruit and vegetable shop should use many types of advertising and promotion to build up the trade.
34. Level 1 (1-3 marks)
35. Has recommended one or more medium or promotion with little or no reasoning.
36. I recommend that the shop owner uses posters as they are cheap. Loss leaders are a good idea. They may increase sales. Displays cost nothing.