The company Balance Sheet helps David assess the performance of the business.

Mark scheme

Marking points from the official mark scheme (May/June 2015). The mark or mark type is shown in brackets.

1. [2] Knowledge [2 × 1] – award one mark for each correct ratio
2. [2] Analysis [2 × 1] – award one mark for each correct calculation
3. Current ratio 1000/600 = 1.66/ 1.67 (1K + 1Ap)
4. Accept 1300/600 = 2.16/ 2.17 if working shown
5. Acid test ratio 700/600 = 1.16/ 1.17 (1K + 1Ap)
6. Accept 1000/600 = 1.6/1.67 if working shown
7. 2 marks for each correct answer; 1 mark if correct method/formula but incorrect answer
8. [4] Application + Analysis [2 × 2] – award one application mark for the comparison between the figures and one analysis mark for each explanation of the calculation result from (i)
9. Indicative response for (a)(ii): The current ratio is lower [ap] because the current liabilities have increased [an]. The acid test ratio is higher (ap) because the amount of inventories has fallen so less working capital is being tied up in inventories [an].
10. NB do not reward 'better' or 'worse' for the comparison of the figures but an explanation of why the figure is better or worse can be credited.
11. Relevant points for (b) might include: Option A (training existing production employees) Advantages: Cheaper; No redundancies; Increased output meets increased sales; Workers feel valued/increased job satisfaction. Disadvantages: Increase in efficiency only by 10%; Large wage costs; Loss of output from experienced workers when carrying out training; Large number of workers to retrain.
12. Option B (automated production line) Advantages: Labour efficiency will increase; Low wage costs; New markets. Disadvantages: High capital cost; Off-the-job training required; Cost of redundancy payments; Worker morale/motivation issues.
13. Knowledge/Analysis/Evaluation – award up to 10 marks using the levels-based mark scheme below.
14. Level 3: At least 2 x Level 2 + 9-10 marks for well justified recommendation as to the best option to choose to increase efficiency compared to the other option.
15. Level 2: 7-8 marks for some limited judgement shown in recommendation as to the best option to choose to increase efficiency.
16. Level 2: 4-6 marks Detailed discussion of advantage/disadvantage of Option A and/or B. NB do not reward mirror image arguments
17. Level 1: 1-3 marks Outline of advantage/disadvantage of Option A and/or B. NB do not reward mirror image arguments
18. Level 1: 1 mark for each L1 statement (max of 3 marks), e.g. only needs to train existing workers and so it is cheaper.
19. Level 2: One L2 explanation can gain 4 marks and a further mark can be awarded for each additional L2 explanation (max 6 marks), e.g. only needs to train existing workers and so it is cheaper. Also by using on-the-job training methods then training costs will not be high. However, output only increases by 10% and so not much additional output of cakes will be gained. (4 marks for L2 answer + 1 application mark for mentioning output of cakes.)
20. Level 3: For L3 to be awarded there needs to be at least two L2 marks awarded and then a recommendation which justifies which is the best option to choose.
21. Award up to 2 additional marks for relevant application.
22. Possible application marks for (b): cake manufacturing; food; off-the-job training; on-the-job training; perishable products; constantly develops a new range of cakes; e-commerce; Figures from Appendix 2; new markets abroad; large supermarkets; small food shops; 100 production workers/10 remaining production workers; 90 redundancies; may need to make some workers redundant; automated production line; efficiency increases by 10% for option A; investment of $8m.