State two methods of primary market research.

Using the information provided and in Table 1, calculating X and Y, construct a profit and loss account for Enjuice.

Using the information provided and in Table 1, calculate the gross profit margin (no working required).

Explain one strategy that Enjuice could use to increase its gross profit margin.

• Surveys
• Interviews
• Focus groups
• Observations

N.B. No application required. Do not credit examples. Sampling is not a method.

Award [1] for each relevant method of primary market research identified. Award a maximum of [2].

X = (360 000 × $8) = $2 880 000

Y = 160 000 × 10 % = $16 000

Profit and loss account for Enjuice for 2018: (all figures in $000s)

Allow candidate own figure rule (OFR).

Award [0] if the profit and loss account does not reach a standard described below.

Award [1] if there is some limited understanding of a profit and loss account. There are more than three errors in presentation and calculations.

Award [2] if there are three clear errors. which includes omission of working, formatting error, mathematical error, presentation. There is limited evidence of a general understanding of the format.

Award [3–4] if the principal elements of the profit and loss account is constructed, but may not be entirely accurate. The calculations under each heading/component/part are largely correct.

Allow up to two mistakes in calculations and/or presentation for [3].

Allow for either one error in calculation or one error in presentation for [4].

Allow candidate OFR.
For example, if one irrelevant figure that belongs to the profit and loss account is added, the rest will not match.

Award [5] if the profit and loss account is accurately constructed in the expected IBO format. All the relevant headings of each component/parts are used and correctly classified. All relevant figures are presented. No extra irrelevant figures are included. The calculations under each part/component are correct and well-presented.

Deduct [1] for one omission including the overall heading/title. Accept a partial title.

N.B. If the candidate did not follow the IBO format award up to [2].

$\frac{440}{2880}$ × 100 = 15.27 %

Accept 15.2 % or 15.3 %.
Award [1] for the correct answer (working not required). Candidates must show a percentage sign.
Do not accept 15 %, or the formulae.
Allow candidate OFR.

• Enjuice could increase its gross profit margin by reducing direct costs/cost of goods sold. It could use cheaper raw materials or instead, find cheaper materials for producing the cans or find cheaper suppliers of cans.
• Enjuice can reduce labour costs by reducing the wages / salaries of its labour on the production line, or by increasing automation in the canning process.
• Enjuice could decrease the price of its juices. Sales revenue might increase as the market for juices is very competitive and customers are likely to be very responsive / very price elastic.
• JIT – perhaps Enjuice can use JIT stock management for aluminum / fruit, or any other metals for the canning process to cut cost of holding stock.
• Technically, if the suggestion of the marketing manager is followed, increasing advertising will reduce net profit before interest and tax, but can increase total revenue with positive impact on gross profit.

N.B. Do not accept increase in price given the information in the stimulus.
Do not credit any suggestion to reduce expenses.

Award [1] for a relevant generic explanation and [1] for application.

[2] cannot be awarded if the response lacks either explanation and/or application.

For an identification or a description of a strategy with or without application [1].

For explanation of a strategy with no application [1].
For description of a strategy with application [1].

For explanation of a strategy and application [2].

A straightforward question, which the majority of candidates answered successfully.

Teachers are reminded that profit and loss accounts must be accompanied by a title. Overall, this question was not approached well by many candidates. Many are still unable to distinguish between those items that go in the balance sheet and those in the profit and loss account. This resulted in candidates attempting to fit ‘all ‘ of the given data into a profit and loss account and consequently scored low marks. Had it not been for the fact that the question asked for the calculation of sales and tax, many would have scored zero marks.

A few candidates showed a good understanding of the profit and loss account but then stopped at net profit after tax – losing 2 marks for missing dividends and retained profit.

A fairly straightforward calculation but still many candidates lost the mark for either incorrect rounding of the answer OR omitting the percentage sign.

This question was poorly answered on several fronts. Firstly, many candidates simply said to increase the price. In a competitive environment this in not possible and this was clear from the stimulus. Secondly, candidates who understood the difference between gross and net expenditure mentioned the idea of increasing advertising to increase sales. Whilst this might indeed increase sales, without any change in the unit costs there would be no change in the profit margin. Finally, even if candidates understood the need for reducing Cost of goods sold, there was often no real application i.e. to finding cheaper suppliers of fruit and/or tins.