State two features of a sole trader.

Construct a fully labelled break-even chart, to scale, for JG for 2022.

Calculate JG’s level of profit if sales are 20 000 units in 2022 (show all your working).

Explain how the changes that Jill expects in fixed and variable costs in 2023 would affect the total costs line of the break-even chart from your answer to (b).

Award [1] for each feature identified – no reference to Jill’s gloves is needed:

• Unincorporated/unlimited liability
• No legal continuity
• One owner of the business
• Owner has full control
• Sole trader enjoys all profits
• No legal distinction exists between sole trader and the business
• Sole trader has total responsibility for the business

Do not award marks for advantages and disadvantages of operating as a sole trader (for example, a sole trader cannot sell shares to other people or to the public) or for the idea that the sole trader performs all of the business functions on their own, as often sole traders employ other people.

Accept any other relevant feature of a sole trader.

Award [1] for each feature of a sole trader stated up to a maximum of [2].

Award [1] mark for correctly labelling both axes.

Award [1] for a correct and correctly labelled total sales revenue line. If the candidates writes “revenue” instead of “total revenue”, accept.

Award [1] for a correct and correctly labelled total costs line.

Award [1] for correctly identifying the break-even point.

N.B. If the chart is not drawn to scale is not neat, not drawn with a straight-edge, maximum award: [2].

A candidate producing a chart that is not to scale may still receive marks for a correct and correctly labelled total revenue line and a correct and correctly labelled total cost line provided that:

• the two lines’ points of intersection with the y-axis are correct (0,0) for the total revenue line and (0, 75 000) for the total cost line)
  
• the point of intersection of the total cost line is labelled $75 000
  
• and the break-even quantity or revenue is specified.
  

The maximum award for a break-even chart would still be [2] because the chart is not to scale.

The level of profit if sales are 20 000 units in 2022 is
TR = 20 000 × $20 = $400 000
TC = $75 000 [fixed costs] + ($15 × 20 000)
      = $75 000 + $300 000 = $375 000
TR − TC = $25 000

Award [1] for correct workings/steps but an incorrect answer from something such as a mathematical error.

If candidates do not show any working and but correctly write $25 000, award [1].

A candidate must refer to the total cost line in their response to receive marks.

The increase in fixed costs would cause the TFC line to shift vertically upwards, award [1]. If a candidate writes something to the effect that the total cost line will now intersect the y-axis at $82 500, accept.

The increase in variable costs would cause the TC line to become steeper (gradient would increase) award [1].

Award a maximum of [1] if no other rewardable points are stated but candidate states that this will increase her break-even point or says something to the effect of “the total cost line goes up.”

Many candidates were successful (2 marks) on this question.

Many candidates earned full marks on this question. Though, as often occurs, some candidates did not draw their chart to scale or did not know how to label properly the y axis.

Many candidates answered the question effectively.

Responses to this question were clear and many candidates received 2 marks.