Define the term productivity rate.

Using the information provided above and in Table 1, calculate the total contribution per month for the production of 20 000 chocolate-filled donuts (show all your working).

Using the information provided above and in Table 1, calculate the monthly profit if Roscas sells sugar donuts and chocolate-filled donuts (show all your working).

Using the information provided above and in Table 2, calculate the payback period for the new machine (show all your working).

Using the information provided above and in Table 2, calculate the average rate of return (ARR) for the new machine (show all your working).

Productivity rate is a measure of the efficiency of production and can be defined as the rate of output to input of production. It is also a measure of the added value of the business.

Award [1] for a basic definition that conveys partial knowledge and understanding.

Award [2] for a full definition that conveys knowledge and understanding similar to the above and refers to inputs and outputs or similar words such as resources and production.

N.B. No application required. Do not credit examples.

Total contribution = contribution per unit x number of units = 3 × 20 000 = $60 000

OR

Total contribution = total revenue – total variable costs = 100 000 − (2 × 20 000) = $60 000

Award [1] for correct working and [1] for the correct answer.

Award up to a maximum of [2].

Working should include some reference to the contribution calculation.

Award a maximum of [1] if $ sign is omitted.

Profit = sales revenue – total costs

Monthly profit = (100 000 + 70 000) − (15 000 + 1000) − (25 000 + 40 000) = $89 000

Award [1] for correct working and [1] for the correct answer. Award up to a maximum of [2].

Award a maximum of [1] if $ sign is omitted, however do NOT penalize more than once if repeated in any question part i.e. part (b)(i) and (b)(ii).

Award [1] if profit for only one of sugar or chocolate is provided.

Award [1] to incorrect answers where there is a single numerical error in what is otherwise correct working.

$\frac{2000-1920}{700}\times$12 = 3 years and 1.37 months or 42 days

Award [1] for correct working and [1] for the correct answer.
Award up to a maximum of [2].
Accept any other method of calculation.
Accept answer discrepancies due to decimal rounding.

ARR = ((total returns − capital cost/years of usage)/capital cost)) × 100

Total returns = $3 330 000

Net return per annum =$\frac{3 330 000-2 000 000}{5}$= $266 000

ARR =$\frac{266 000}{2 000 000}\times$100 = 13.3 %

Award [1] for correct working and [1] for the correct answer.
Award up to a maximum of [2].

Award a maximum of [1] if % sign is omitted.
Do not penalize if workings are left in 000’s.

Whilst seemingly a straightforward question, many candidates confused productivity rate with production rate. The former looks at the relationship between inputs and outputs, the latter simply with speed. It is quite possible to have a high rate of production, but a low rate of productivity. This question was made easier by the fact that the formula was given in the formula sheet.

Again a simple question but many candidates seemed to think they need to add in or subtract fixed costs which was incorrect. Others simply worked out the individual unit contribution and not the total.

Generally, this question was well answered, and candidates were given credit for only providing the profit for one donut option. However, many candidates lost a mark for not including the dollar sign.

There were a number of different methods applied by candidates. All of these were credited if sufficient workings were shown, however many candidates did not provide sufficient evidence of how they got their final answer.

Average rate of return (ARR) has been set in a number of recent past papers and it was pleasing to see that application was much improved. However, candidates had assistance from the formula sheet.