| Date | November 2018 | Marks available | 2 | Reference code | 18N.2.SL.TZ0.2 |
| Level | Standard level | Paper | Paper 2 | Time zone | Time zone 0 |
| Command term | Define | Question number | 2 | Adapted from | N/A |
Question
Patras Furniture (PF)
Patras Furniture (PF) manufactures chairs. PF uses batch production.
Currently, PF sells 200 chairs per month. Each chair sells at an average price of €100. Below are the forecasted fixed and variable costs for 2019.
Table 1: Fixed costs
Table 2: Variable costs per chair
Define the term batch production.
Calculate the break-even level of output for PF for 2019 (show all your working).
Construct a fully labelled break-even chart, to scale, for PF for 2019.
Calculate the forecasted profit if PF sells 2400 chairs in 2019 (show all your working).
Markscheme
Batch production involves making a group of identical items together, and each stage of operation is performed on the whole group before it moves on to the next stage.
Candidates are not expected to word their definition exactly as above.
Award [1] for a basic definition that conveys partial knowledge and understanding.
Award [2] for a full, clear definition that conveys knowledge and understanding, such as stating that batch production involves a group of identical items made at the same time and then moving on to the next stage together.
Fixed costs: €24 000 + €6000 + €11 000 + €40 000 + €18 000 = €99 000
Contribution: €100 – €50 – €5 = €45
= 2200 chairs must be sold to break-even.
Award [1] for working or formula and [1] for the correct answer. Award up to a maximum of [2].
Award marks as follows:
- [1] for both appropriately labelled axes.
- [1] for an accurately drawn and labelled total revenue curve.
- [1] for an accurately drawn and labelled total costs curve.
- [1] for the identification of the break-even level of output.
Award [0] if a candidate produces a table, and award no more than [2] if the chart is not neat, not drawn with a straight-edge, or is not to scale. Ideally, the candidate will draw an arrow pointing to the break-even point and label the arrow. However, accept as an “appropriately labelled” break-even point a vertical line from the x-axis to the break-even point.
2400 × €100 = Sales revenue €240 000
Less: Variable costs (€50 + €5) × 2400 <€132 000>
Less: Fixed costs <€99 000>
Forecasted profit €9000
Another possible response is:
(2400 − 2200) × 45 = 9000
Reward other acceptable methods of calculating forecasted profit on sales of 2400 chairs.
Award [1] for working or formula and [1] for the correct answer. Award up to a maximum of [2].
