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Date November 2017 Marks available 2 Reference code 17N.2.HL.TZ0.2
Level Higher level Paper Paper 2 Time zone Time zone 0
Command term State Question number 2 Adapted from N/A

Question

Tasty Cupcake (TC)

Luis and José have set up a partnership, baking and selling cupcakes directly to consumers and supermarkets. They called the business Tasty Cupcake (TC). They used their savings of $3000 as starting capital. The partners need an overdraft agreement from the local bank. The bank manager asked for a cash-flow forecast.

Luis has forecasted the following sales and cost figures for the first six months of operation, beginning in January.

Sales

Costs

State two features of a partnership.

[2]
a.

Prepare a monthly cash-flow forecast for TC for the first six months of operation.

[6]
b.

Calculate TC’s forecasted net profit at the end of June (show all your working).

[2]
c.

Markscheme

Possible features include:

Accept any other relevant feature.

Do not accept shares – they cannot be sold on the stock market as there are no shares.

Accept shares cannot be issued.

Award [1] for each correct feature stated. Award a maximum of [2].

Application is not expected.

a.

N.B. Allow candidate own figure rule (OFR): if a candidate makes an error in one row and carries it through the remainder of the forecast that is only one error. This provision includes both mathematical errors and conceptual errors (for example, if a candidate has the rent in the incorrect month then candidates should only lose [1] for that error.

Award [1] if the candidate conveys some understanding of what a cash flow forecast is, but otherwise the forecast is largely inaccurate, incomplete, or illegible.

Award [2–3] if a cash flow forecast is drawn, but either it is not in a generally accepted format or it is untidy, and/or the forecast contains three or more errors, which could include, in addition to number placement problems and mathematical errors, conceptual errors (using the word “profit” rather than “net cash flow”) or omissions, such as not having a line like “closing balance” or totals.

Award [4–5] if the cash flow forecast is drawn essentially correctly and neatly in a generally accepted format, but there is one error for [5] or two errors for [4].

Award [6] if the cash flow forecast is drawn accurately and neatly in a generally accepted format, and is error free.

If the candidate provided a heading of total inflow/outflow without using another heading above of inflow or outflow – do not penalise as an omission.

If the candidate omitted both headings of outflow/inflow = one error

Substituting the term “net profit in the cash flow forecast for “net cash flow” is inaccurate and [1] should be deducted.

If the candidate has only one row for all cash outflows, subtract [1] from the total mark awarded.

Full working is not expected.

b.

Closing balance in June - opening balance in January plus credit sales = 5050 − 3000 + 2550 = $4600.

2550 are added as there was an additional amount of cash due which was credit before but should be added to the total revenue.

Accept any other relevant working provided the workings are clear and logically presented.

Award [1] for working and [1] for the correct answer. Award up to a maximum of [2]. If the credit sales are not added then this counts as one error and [1] should be awarded.

Award [1] for working correctly either the total revenue or the total costs.

Total Revenue = 1300 × $5 + 1700 × $5 × 5 months = $49 000.

Credit candidates who included the labor costs under direct costs.

 

c.

Examiners report

[N/A]
a.
[N/A]
b.
[N/A]
c.

Syllabus sections

Last exams 2023 » Unit 1: Business organization and environment » 1.2 Types of organizations » The main features of the following types of for-profit (commercial) organizations: sole traders, partnerships, companies/corporations
Last exams 2023 » Unit 1: Business organization and environment » 1.2 Types of organizations » The main features of the following types of for-profit social enterprises: cooperatives, microfinance providers, public-private partnerships (PPP)
Last exams 2023 » Unit 1: Business organization and environment » 1.2 Types of organizations
Last exams 2023 » Unit 1: Business organization and environment

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