Calculate: The total cost per month of producing 100 items of furniture.

Mark scheme

Marking points from the official mark scheme (May/June 2019). The mark or mark type is shown in brackets.

1. [2] Award 1 mark for correct costs and 1 mark for correct answer
2. [2] $10 000 + $1200 + $800 + $4000 (1) = $16 000 (1)
3. [2] Note - if answer is only $16000 with no working then award 2 marks
4. [2] Award 1 mark for correct figures used and 1 mark for correct answer
5. [2] $16000 / 100 (1) = $160 per item of furniture (1)
6. [2] Note - If answer is only $160 with no working then award 2 marks
7. [4] Award 1 mark per point:
8. [4] Total cost will increase due to increase in variable costs (1) – as more wood will need to be purchased (1)
9. [4] TC = $26 000 / increased by $10000 (1)
10. [4] Average cost will fall (1) – as the fixed costs will not change (1) – which means the fixed costs are spread over a larger output. (1)
11. [4] AC = $130 per item of furniture / decreased by $30 (1)
12. [4] Total cost will increase whilst average cost will fall (1) (Apply OFR)
13. [4] Note - 4 marks can be awarded even if no figures are included.
14. [12] Relevant points might include: Introduction of new cost to businesses of $50 per tonne for removing waste: Increased cost of removing waste – higher prices - less demand for furniture – lower profit
15. [12] Introduction of new cost to businesses of $50 per tonne for removing waste: Applies to all businesses so not less competitive - if reduce waste produced then may be more competitive
16. [12] Increase in legal minimum wage by 5%: No effect as already paid 10% above minimum wage
17. [12] Increase in legal minimum wage by 5%: Increased wage costs – to keep pay differential - increased total cost - lower profit
18. [12] Increase in legal minimum wage by 5%: Increased income - increased demand for furniture - higher sales and profit
19. [12] Increase in legal minimum wage by 5%: May increase motivation if increase in wage rates for employees
20. [12] Increase in tax on incomes: Lower incomes as pay after tax will be lower – lower demand - lower sales of furniture
21. [12] Increase in tax on incomes: WA furniture is higher quality so may not have much effect on sales
22. [12] Increase in tax on incomes: Workers may demand higher wages to compensate for loss of disposable income
23. [12] Award up to 10 marks using the levels-based mark scheme below.
24. [12] Level 3: At least 2 x Level 2 + 9–10 marks for well justified conclusion as to which change will have the greatest effect on WA rather than the other two changes. 7–8 marks for limited justified conclusion as to which change will have the greatest effect on WA.
25. [12] Level 2: 4–6 marks Discussion of the impact of the changes on WA.
26. [12] Level 1: 1–3 marks Outline of impact of changes on WA.
27. [12] Level 1 - 1 mark for each L1 statement (max of 3 marks) e.g. Increased amount to pay to get rid of waste will raise costs.
28. [12] Level 2 - 1 x L2 explanation can gain 4 marks and a further mark can be awarded for each additional L2 explanation (max 6 marks) e.g. Increased amount to pay to get rid of waste will raise costs and WA may need to increase the price of its furniture. Higher prices may deter customers and so sales and possibly profit will fall. (L2 plus application for referring to furniture in the answer)
29. [12] Level 3 - For L3 to be awarded there needs to be at least two level 2 marks awarded and then a conclusion as to which change will have the biggest impact on WA.
30. [12] Award up to 2 additional marks for relevant application.
31. [12] Possible application marks: Family owned Itd company; small business; started 10 years ago; furniture; new fashionable designs each year; individually designed furniture produced using job production; selling price $200 and $250 per item; environmentally friendly business objective; reduced profit in 2018; tables / chairs; paid 10% above minimum wage; WA prices are higher than competitors.