| Date | November 2017 | Marks available | 2 | Reference code | 17N.2.SL.TZ0.1 |
| Level | Standard level | Paper | Paper 2 | Time zone | Time zone 0 |
| Command term | Describe | Question number | 1 | Adapted from | N/A |
Question
Pelican Pies (PP)
Pelican Pies (PP) produces high-quality pies that have limited brand loyalty outside of their local market. The prices of the pies are higher than those of PP’s competitors.
Table 1: Selected financial information for PP for the year ending 30 April 2017.
For 2018, PP’s owner, Austin, is looking to increase sales beyond the local market by lowering prices and spending a greater proportion of PP’s promotional budget on above-the-line methods such as regional newspaper advertisements. To finance this type of promotion, Austin will have to increase his loan amount by $10 000.
Table 2: Selected financial information for the year ending 30 April 2018.
Describe one reason why brand loyalty would be important to PP.
Construct a profit and loss account for PP for the year ending 30 April 2017 based on the figures in Table 1 (show all your working).
Construct a forecasted profit and loss account for PP for the year ending 30 April 2018 based on the figures in Table 2 (show all your working).
Markscheme
Brand loyalty would be important to PP given that they operate in a local market with a number of competitors and that the prices they charge are higher. Given this fact, it would be critical for PP to have brand loyalty or their sales could fall (although not on the stimulus, sharp-eyed candidates may spot that PP’s pies are price inelastic given the additional information for 2018).
Accept any other relevant description.
Award [1] mark for conveying some understanding that PP has considerable competition or that it charges higher prices than most of its competitors. If a candidate conveys an understanding of both of those ideas, award [2] marks.
A candidate can achieve one or two marks by making other accurate assertions about brand loyalty, provided they are relevant and logically reasonable (for example, brand loyalty assures some continuity of revenue or stable revenue). Award up to a maximum of [2].
Profit and loss account for PP for year ended 30 April 2017:
Award marks as follows:
Candidates do not have to list all types of expenses (electricity, rent, promotion) under expenses, as the IBO format does not specify different items. Therefore, working of electricity and rent per year are not expected.
Supporting working is expected with the calculation of total revenue/costs /interest/tax are given.
Profit and loss account for PP for year ended 30 April 2018:
N.B. Do not double penalize candidates if they use the same incorrect format from part (b).
Award marks as follows:
Candidates do not have to list all types of expenses (electricity, rent, promotion) under expenses, as the IBO format does not specify different items. Therefore, working of electricity and rent per year are not expected.
Supporting working is expected with the calculation of total revenue/costs /interest/tax are given.
Please note:
If the candidate was penalised for inappropriate structure or headings/format in part (b) and repeats the same in part (c) provided that the working is correct and shown, do not double penalise and award full marks.
Generally, do not double penalise any wrong headings/ omission presented in part (b) and repeated in part (c). Question (c) is more about the manipulation/ calculation of the old figures.
However, be aware that sometimes a candidate makes a mistake in question (b) (for example, in calculating income tax) and also miscalculates income tax in question (c) but makes a different kind of error (in one instance multiplies 25 % by net profit before tax but makes a mathematical error and then, in the other instance, multiples 25% by net profit before interest), then each should be counted as an error.
