9706_s08_ms

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MARK Sales Profit Level May June MARK SCHEME Syllabus SCHEME Syllabus paper Syllabus paper GCE cost
 
UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS 
GCE Advanced Subsidiary Level and GCE Advanced Level  
 
 
 
MARK SCHEME for the May/June 2008 question paper 
 
 
 
 
 
9706 ACCOUNTING 
9706/02 
Paper 2 (Structured Questions (Core)), 
maximum raw mark 90 
 
 
This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of 
the examination.  It shows the basis on which Examiners were instructed to award marks. It does not 
indicate the details of the discussions that took place at an Examiners’ meeting before marking began.   
 
All Examiners are instructed that alternative correct answers and unexpected approaches in 
candidates’ scripts must be given marks that fairly reflect the relevant knowledge and skills 
demonstrated. 
 
Mark schemes must be read in conjunction with the question papers and the report on the 
examination. 
 
 
 
• 
CIE will not enter into discussions or correspondence in connection with these mark schemes. 
 
 
 
CIE is publishing the mark schemes for the May/June 2008 question papers for most IGCSE, GCE 
Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level syllabuses. 
 
Page 2 
Mark Scheme 
Syllabus 
Paper 
 
GCE A/AS LEVEL – May/June 2008 
9706 
02 
 
© UCLES 2008 
1 
(a)  
Trading and Profit and Loss account for the year ended 30 April 2008 
 
 
 
 
 
$ 
$ 
$ 
 
 
Sales 
 
 
243 000 
 
 
Less returns 
 
 
 2 040 
 
 
 
 
 
 
240 960 
 
 
Less cost of sales 
 
 
Stock at 1 May 2007 
 
13 500 
 
 
Purchases 
184 000 
 
 
Less returns 
 1 980 
 
 
(1) 
 
 
 
 
182 020 
 
 
Add carriage in 
 
350 
182 370 
 
(1) 
 
 
 
 
 
195 870 
 
 
Less stock at 30 April 2008 
 
 15 100 
180 770 
 
 
Gross profit 
 
 
60 190 
 
 
Discount received 
 
 
1 300 
 
 
Rent receivable 
(2420 + 220) 
 
 
2 640 
(1) 
 
 
Doubtful debts provision  
(500 – 3% × (9000-200)) 
 
 
 
236 
(1) 
 
 
 
 
 
 
64 366 
 
 
Bad debts written off 
 
200 
 
 
Carriage out 
 
800 
 
 
Discount allowed 
 
1 800 
 
 
Electricity 
(2100 – 40) 
 
2 060 
 
(1) 
 
 
General expenses 
(9340 + 50) 
 
9 390 
 
(1) 
 
 
Depreciation on machinery ((52000 – 15600) × 40%) 
 
14 560 
 
(1) 
 
 
Interest due on loan 
((11% × 60000)/2) 
 
 3 300 
32 110 
(1) 
 
 
Net profit 
 
 
32 256 
 
 
 
 
 
 
 
[8] 
 
 
Page 3 
Mark Scheme 
Syllabus 
Paper 
 
GCE A/AS LEVEL – May/June 2008 
9706 
02 
 
© UCLES 2008 
 
(b)  
 
Balance Sheet at 30 April 2008 
 
 
 
 
 
 
$ 
$ 
$ 
 
 
Fixed Assets 
 
 
Net Book Value 
 
 
Premises 
 
 
 
250 000 
 
 
Machinery 
 
 
 
 21 840 
(1)of if < 36 400 
 
 
 
 
 
 
 
271 840 
 
 
Current Assets 
 
 
Stock 
 
15 100 
 
 
Debtors 
8 800 
 
 
 must be 8800 and 
 
 
Less DD Provision 
264 
8 536 
 
 (1)of if DDP < 500 
 
 
Cash 
 
990 
 
 
Prepayment 
 
40 
 
 
(1) 
 
 
Rent receivable 
 
 
220 
24 886 
 
(1) 
 
 
Amounts due within one year 
 
 
Creditors 
 
11 460 
 
 
Bank 
 
8 260 
 
 
(1) 
 
 
Accrual 
 
50 
 
 
(1) 
 
 
Interest due 
 
 3 300 
23 070 
 
(1) 
 
 
Net current assets 
 
 
 
 1 816 
(1)of 
 
 
 
 
 
 
 
273 656 
 
 
Amount due over one year 
 
 
Long-term loan (11%) 
 
 
 
 60 000 
 
 
 
 
 
 
 
213 656 
 
 
 
 
Proprietor's interest 
 
 
Capital at 1 May 2007 
 
 
 
200 000 
(1)of 
 
 
Add net profit 
 
 
 
 32 256 
(1) 
 
 
 
 
 
 
 
232 256 
 
 
 
less drawings 
 
 
 
 18 600 
(1) 
 
 
 
 
 
 
 
213 656 
 
 
 
 
 
 
 
 
[11] 
 
 
 
(c) (i) Current ratio = 24886/23070 
1.08:1 
(1)of 
 
(ii) Liquid ratio = 9786/23070 
0.42:1 
(1)of 
 
(iii) Rate of stock turnover = 180770/14300 
12.64 times 
(1)of 
 
(iv) Gross profit as a percentage of sales 28.87 days 
24.98%  
(1)of 
 
(v) Net profit as a percentage of sales 
13.39% 
(1)of 
 
 
 
 
(iv) and (v) denominator must be net sales i.e. not 243 000 
 
 
 
Need suffixes.  
 
 
 
If correct working shown disregard request for decimal places  
 
 
  
[5] 
 
Page 4 
Mark Scheme 
Syllabus 
Paper 
 
GCE A/AS LEVEL – May/June 2008 
9706 
02 
 
© UCLES 2008 
 
(d) (i) Ratios are used to compare a firm's performance with another year, or with another 
business of the same type. 
[2] 
 
 
(ii) Interested parties might be: 
 
 Bank manager 
Directors 
Competitors 
 
 
 
Customs and excise 
 
Creditors 
Investors/Shareholders 
 
 
 
Employees 
 
Debtors 
NOT Stakeholders 
 
 
 
The media (Newspapers, TV etc) 
 
 
 
Allow ONE group only of members of the firm 
 
 
 
 
 
Etc. 
One mark each to a maximum of 
 
 
[4] 
 
 
 
 
 
 
 
 
[Total: 30] 
 
 
2A  
 
 
$ 
$ 
 
 
 
 
– 
+ 
 
Profit and loss balance 
100 000 
 
Capital contribution 
 
80 000 
 
(1) 
 
Sales returns 
no effect 
 
 
Depreciation (240 000 + 75 000) × 40% 
126 000 
 
(2) 
 
Interest accrued 
 
10 000 
 
(1) 
 
Drawings 
 
 
 
50 000 
(1) 
 
Stock 
 
 
 
9 000 
 
(1) 
 
Goods for own use 
 
 
11 000 
(1) 
 
Loan 
 
 
 
 
20 000 
(1) 
 
Equipment repairs 
 
25 000 
 
(1) 
 
Stock purchase 
 
 22 000 
 
 
(1) 
 
 
 
 
372 000 
81 000 
 
 
 
 
 
 
–81 000 
 
 
 
 
 
 
 
 
291 000 
 (1) + (1)of 
 
 
 
 
 
 
 
 
 
[12] 
 
2 marks for $291 000, 1 of provided EITHER (a) no entry for sales returns or (b) entry for 
sales/purchases returns in BOTH columns 
 
 
B 
(a)  
 
Sales Ledger Control Account 
 
 
 
Balance b/d 
340 600 
 
Balance b/d 
1 960 
 
 
Credit sales 
295 000 
(1) Sales returns 
6 480 
(1) 
 
 
Bank 
3600 
 
Bank 
238 600 
(1) 
 
 
Discount allowed 
200 
(2) Discount allowed 
3 500 
(1) 
 
 
 
 
 
 
Contra 
5 000 
(1) 
 
 
 
 
 
 
Bad debt 
2 300 
(1) 
 
 
Balance c/d 
 8 340 
(1) Balance c/d 
389 900 
(1)of 
 
 
 
 
 
 
 
 
(no aliens) 
 
 
 
 
647 740 
 
 
647 740 
 
 
Balance b/d 
389 900 
(1) Balance b/d 
8 340 
(1) 
 
 
 
If Bank shown net 235 000 on credit side award (1) mark 
 
 
If Discount allowed shown net 3300 on credit side award (3) marks 
 
 
Do not award full marks for correct balances b/d as Bank may be shown as 3800 on debit 
side. 
 
 
 
[12] 
 
 
Page 5 
Mark Scheme 
Syllabus 
Paper 
 
GCE A/AS LEVEL – May/June 2008 
9706 
02 
 
© UCLES 2008 
 
(b) Overpayment 
 
 
Payment in advance 
 
 
Credit note issued  
 
 
Deposit received 
 
 
Etc.  
1 mark each to maximum  
 
 
[3] 
 
 
 
(c) Less chance of fraud 
 
 
Less chance of errors 
 
 
Fraud or errors easier to find 
 
 
Checking easier 
 
 
Total debtors and creditors figures available 
 
 
Etc.  
1 mark each to maximum  
 
 
[3] 
 
 
 
 
 
 
 
 
 
 
[Total: 30] 
 
 
3 
(a)  
 
$ 
 
$ 
 
 
Unit selling price 
 
 
1 100 
(1) 
 
 
Less 
 
 
Direct materials 
128 
(1) 
 
 
Direct wages 
625 
(1) 
 
 
Variable production overhead 
40 
(1) 
 
 
Variable sales overhead 
 30 
(1) 
 823 
 
 
Unit contribution 
 
 
 277 
 
[5] 
 
 
 OR 
 
 
 
Sales 
 
 
8 800 000 
(1) 
 
 
Less 
 
 
Direct materials 
1 024 000 
(1) 
 
 
Direct wages 
5 000 000 
(1) 
 
 
Variable production overhead 
320 000 
(1) 
 
 
Variable sales overhead 
 240 000 
(1) 6 584 000 
 
 
Total contribution 
 
 
2 216 000 
/ 8 000 
 
 
Unit contribution 
 
 
277 
 
[5] 
 
 
 OR 
 
 
 
Total contribution = Profit + Fixed costs 
 
 
1 656 000 + 640/2 + 480/2 = 2 216 000 divided by 8000 for unit contribution = 277 
 
 
 
1 
2 
2 
 
 
 
 
[5] 
 
 
The answer 307 should be awarded (4) marks. 
 
 
Page 6 
Mark Scheme 
Syllabus 
Paper 
 
GCE A/AS LEVEL – May/June 2008 
9706 
02 
 
© UCLES 2008 
 
(b)  
 
BUY IN 
 
LEASE 
 
EXTRA 
 
 
 
 
 
 
 
 
SHIFT 
 
 
 
 
$ 
 
$ 
 
$ 
 
 
Sales 
2 200 000 
(1) 2 200 000 
(1) 2 200 000 
(1) 
 
 
Less 
 
 
Buy in, lease, training 
1 840 000 
(1) 
260 000 
(1) 
50 000 
(1) 
 
 
Direct materials 
 
 
256 000 
(1) 
256 000 
(1) 
 
 
Direct wages 
 
 
1 250 000 
(1) 1 437 500 
(2) 
 
 
Variable production overhead 
 
 
80 000 
(1) 
80 000 
(1) 
 
 
Variable sales overhead 
 
60 000 
(1)  60 000 
(1)  60 000 
(1) 
 
 
Total variable costs 
1 900 000 
(1) 1 906 000 
(1) 1 883 500 
(1) 
 
 
 
Extra profit 
300 000 
(1)of 294 000 
(1)of  316 500 
(1)of 
[22] 
 
 
Alternative (wrong) 
360 000 
(4) 
224 000 
(7) 
 
 
answers 
2 016 000 
(3) 
 
 
 
The feasibility study is treated as a sunk cost - lose of mark for extra profit on leasing if 
feasibility cost included. 
 
 
 
Candidates may use a mix of methods between options, e.g. use the above for option 1 and 
the method below for options 2 and 3. There is no problem here. 
 
 
 
 OR candidates may calculate the total rather than the additional profit and this is possibly 
most likely. 
 
 
 
Sales 
11 000 000 
(1) 11 000 000 
(1) 11 000 000 
(1) 
 
 
Direct materials 
1 024 000 
 
1 280 000 
(1) 
1 280 000 
(1) 
 
 
Direct labour 
5 000 000 
 
6 250 000 
(1) 
6 437 500 
(2) 
 
 
Variable production overhead 320 000 
 
400 000 
(1) 
400 000 
(1) 
 
 
Variable sales overhead 
300 000 
(1) 
300 000 
(1) 
300 000 
(1) 
 
 
Fixed production overhead 
320 000 
 
320 000 
 
320 000 
 
 
 
Fixed sales overhead 
240 000 
 
240 000 
 
240 000 
 
 
 
Buy in, Lease, Training 
 1 840 000 
(1) _ 260 000 
(1) 
__ 50 000 
(1) 
 
 
Total costs 
 9 044 000 
 
 9 050 000 
  
9 027 500 
 
 
 
Profit  
1 956 000 
(1)of 1 950 000 
(1)of 1 972 500 
(1)of 
 
 
Original profit 
 1 656 000 
 
 
1 656 000 
  
1 656 000 
 
 
 
Additional profit 
300 000 
(1)of 294 000 
(1)of 
316 500 
(1)of [22] 
 
 
 OR possibly a unit approach 
 
 
 
Selling price 
           1100 
(1)            1100 
(1) 
      1100.00 
(1) 
 
 
DM   
 
 
 
128 
(1) 
128.00 
(1) 
 
 
DL   
 
 
 
625 
(1) 
718.75 
(2) 
 
 
VPO  
 
 
 
40 
(1) 
40.00 
(1) 
 
 
VSO  
30 
(1)  
30 
(1) 
30.00 
(1) 
 
 
Buy in, Lease, Training 
             920 
(1)              130 
(1) 
          25.00 
(1) 
 
 
Total costs 
             950 
 
              953 
  
        941.75 
 
 
 
Unit profit 
150 
(1)of 
147 
(1)of 
158.25 
(1)of 
 
 
× 2000 = Added profit 
 300 000 
(1)of 
 294 000 
(1)of 
 316 500 
(1)of [22] 
 
 
Page 7 
Mark Scheme 
Syllabus 
Paper 
 
GCE A/AS LEVEL – May/June 2008 
9706 
02 
 
© UCLES 2008 
 
(c) Introduce an evening shift (or whichever is most cost-effective) 
(1)of 
 
 
Advantage - no need to spend so much money on training in future years. 
(1) 
 
 
Disadvantage - work involved in setting this up. 
(1) 
[3] 
 
 
Or any other reasonable advantage/disadvantage. 
 
 
If candidate suggests answer not totally based on cost/profit, accept 
 
 
provided good reason given – e.g. (Advantage) buying in is simplest solution  
 
 
but (Disadvantage) can't guarantee quality. 
 
 
 
The own figure mark cannot be given unless all three options are attempted. 
 
 
 
[Total: 30] 
 
 
 
 
There are, unfortunately, other possibilities for the three options which cannot be ignored, 
though they are unlikely to appear. 
 
 
 
Candidate may use the contribution figure calculated in the 3rd version of (a). 
 
 
 
 
 
$ 
$ 
 
 
Option 1 
 
 
8000 × 277 (from (a)) 
 
 
2 216 000 
(1)of 
 
 
2000 × 1100 
 
 
2 200 000 
(1) 
 
 
 
 
 
 
4 416 000 
 
 
 
Buy in 
1 840 000 
(1) 
 
 
Sales o/h 
60 000 
(1) 
 
 
Original profit 
1 656 000 
 
 
Fixed costs 
 560 000 
 
4 116 000 
 
 
 
 
 
 
300 000 
(1)of 
[5] 
 
 
 
Option 2 
 
 
Sales (1)       (1)      (1) 
 
 
2 200 000 
(1) 
 
 
less (7144 – 560) × 2 
 
 
                       8       (1) 
1 646 000 
 
 
 
Lease 
 260 000 
(1) 
1 906 000 
(1) 
 
 
 
 
 
 
294 000 
(1) 
[8] 
 
 OR 
 
 
10 000 × 277 
 
 
2 770 000 
(5) 
 
 
 
less 
 
 
 
Lease 
260 000 
(1) 
 
 
 
 
 
 
Fixed costs 
560 000 
 
 
 
 
 
 
 
Original profit 
1 656 000 
 
2 476 000 
(1) 
 
 
 
 
 
 
294 000 
(1) 
[8] 
 
 
The figure $2 770 000 recognises the increase in sales, materials, variable production costs 
and sales overheads. 
 
Page 8 
Mark Scheme 
Syllabus 
Paper 
 
GCE A/AS LEVEL – May/June 2008 
9706 
02 
 
© UCLES 2008 
 
 
Option 3 
 
 
 
Sales 
 
 
2 200 000 
(1) 
 
 
 
less  (1)        (1)     (1) 
 
 
 
 
(7144 – 560) × 2 
 
 
 
                      8      (1) 1 646 000 
 
 
 
Training 
50 000 
(1) 
 
 
 
Labour 
 187 500 
(1) 
1 883 500 
(1) 
 
 
 
 
 
 
316 500 
(1) 
[9] 
 
 OR 
 
 
 
10 000 × 277 
 
 
2 770 000 
(5) 
 
 
less 
 
 
 
Training 
50 000 
(1) 
 
 
 
Labour 
187 500 
(1) 
 
 
 
Fixed costs 
560 000 
 
 
 
Original profit 
1 656 000 
 
2 453 500 
(1) 
 
 
 
  
 
 
316 500 
(1) 
[9] 
 
 
 
Further possibilities: 
 
 
 
Option 1 
 
 
 
Sales 
 
 
2 200 000 
(1) 
 
 
 
less purchases 
 
 
1 840 000 
(1) + (1) 
 
 
 
  
 
 
 360 000 
(1) 
[4] 
 
 
Only omission is variable costs so award an extra 1 for assumed sub-total 
 
 
 
 
Option 2 
 
 
 
Contribution 
 
 
2 770 000 
(5) 
 
 
 
less costs (560 000 + 260 000) 
 
 
 820 000 
(1) 
 
 
 
Profit 
 
 
1 950 000 
(1) 
 
 
 
Original profit 
 
 
1 656 000 
 
 
 
  
 
 
294 000 
(1) 
[8] 
 
 
 
Option 3 
 
 
 
Contribution 
 
 
2 770 000 
(5) 
 
 
 
less Variable cost 
 
 
1 437 500 
 
 
 
New contribution 
 
 
1 332 500 
 
 
 
less fixed costs 
 
 
 560 000 
 
 
 
  
 
 
772 500 
 
 
 
Training cost 
 
 
 50 000 
(1) 
 
 
 
New Profit 
 
 
 722 500 
 
 
 
Additional profit (1 656 000 - 722 500) 
933 500 
(1)of 
[7]