Calculate the profit per day for AH using the information in Appendix 3.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2017). The mark or mark type is shown in brackets.

1. Revenue per day = (25 × $5) + (25 × $10) (1) = $375 (1)
2. (Award 1 mark for method of calculating revenue but incorrect answer)
3. $375 - $325 (1)
4. (Award 1 mark for method of calculating profit but incorrect answer)
5. Profit per day = $50 (1)
6. If $50 with no working shown then award 4 marks.
7. Knowledge - 1 mark for correctly identifying one way profit can be increased.
8. Possible ways: Increase revenue (1) e.g. by increasing prices/advertising more/introducing a new service (1); Reduce costs/expenses (1) e.g. by finding cheaper suppliers/improving efficiency (1)
9. Analysis award up to 3 marks – 2 of which must be applied to this context - for a relevant explanation of one way AH could increase profit.
10. Indicative response: Elsie could increase her revenue (1) by promoting her existing services to attract more customers.(1) This will lead to more pet owners using her services and paying for their animals to be washed and groomed. (1) If costs increase by less than the increase in revenue then profit will increase. (1)
11. Possible application marks: Animals; dogs; cats; pets; pet owners; washing and brushing animals; qualified animal nurse; set up 2 years ago; $10 000 from grandfather; $10 000 from bank loan; 12 adults and 6 children workers; paid legal minimum wage; shampoo and brushes purchased from wholesaler; expand and move to larger site; needs to recruit a new manager; information on the three sites; information from Appendix 1 on the AH advert; complaint on the social media message; information from Appendix 3 on the costs and revenue of AH.
12. There may be other examples in context that have not been included here
13. Relevant points might include: Cash flow forecast – predicts cash in-flows and outflows – to avoid liquidity problem – is there sufficient working capital for the larger premises? Income statement – records revenue and costs or shows profit and loss – profit available to reinvest into the new premises – indicator of success of the business – will there be sufficient revenue from larger premises to make profit? Balance sheet – records assets and liabilities – liquidity ratios – stability of the business – amount of liabilities – value of the existing business – assets to sell if necessary
14. Knowledge/Analysis/Evaluation – award up to 10 marks using the levels-based mark scheme below.
15. Level 3 (9-10 marks): At least 2 x Level 2 + well justified recommendation as to which is most important to the decision about how to finance the new site. (7-8 marks): For some limited judgement shown in recommendation as to which is most important in its general usefulness to the business.
16. Level 2 (4-6 marks): Discussion of each financial statement, how it can be used and why it is important.
17. Level 1 (1-3 marks): Outline of what each financial statement shows.
18. Level 1 - 1 mark for each L1 statement (max of 3 marks) e.g. A balance sheet shows the value of the business.
19. 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. A balance sheet shows the value of the business. If Elsie wants to take out a bank loan then she will need to take the balance sheet to show the bank manager the value of the assets of the business that can be used as security for the loan. (4 marks for level 2)
20. Level 3 - For L3 to be awarded there needs to be at least two L2 marks awarded and then a recommendation which is most important to the decision.
21. Award up to 2 additional marks for relevant application.
22. Possible application marks: Animals; dogs; cats; pets; pet owners; washing and brushing animals; set up 2 years ago; $10 000 from grandfather; $10 000 from bank loan; 12 adults and 6 children workers; paid legal minimum wage; shampoo and brushes purchased from wholesaler; expand and move to larger site; needs to recruit a new manager; information on the three sites; information from Appendix 1 on the AH advert; information from Appendix 3 on the costs and revenue of AH.
23. There may be other examples in context that have not been included here.