Mark Scheme

Series 3 2015
Results

Pearson LCCI Level 3 Advanced

Business Calculations (ASE3003)
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ASE3003
2 3_2015
General Marking Guidance

 All candidates must receive the same treatment. Examiners must

mark the first candidate in exactly the same way as they mark the last.

 Mark schemes should be applied positively. Candidates must be

rewarded for what they have shown they can do rather than penalised
for omissions.

 Examiners should mark according to the mark scheme not according to

their perception of where the grade boundaries may lie.

 There is no ceiling on achievement. All marks on the mark scheme

should be used appropriately.

 All the marks on the mark scheme are designed to be awarded.

Examiners should always award full marks if deserved, i.e. if the
answer matches the mark scheme. Examiners should also be prepared
to award zero marks if the candidate’s response is not worthy of credit
according to the mark scheme.

 Where some judgement is required, mark schemes will provide the

principles by which marks will be awarded and exemplification may be
limited.

 When examiners are in doubt regarding the application of the mark

scheme to a candidate’s response, the team leader must be consulted.

 Crossed out work should be marked UNLESS the candidate has

replaced it with an alternative response.

ASE3003
3 3_2015
Question Answer Mark
Number
1 (a) One mark (M1) for a correct method
(365 x 0.0096) is acceptable
One mark (A1) for exactly the answer shown

Calculated annual rate of interest

= 365 x 0.0096% M1

= 3.504% A1 (2)

Question Answer Mark

Number
1 (b) (i) One mark (M1) for a correct method
(0.0096 x 3 x 25,000) is acceptable
One mark (A1) for 7.20 or 7.2

Interest earned = 0.0096% x 3 x £25,000 M1

= £7.20 A1 (2)

Question Answer Mark

Number
1 (b) (ii) One mark (M1) for a correct method
(their (a) x 3 x 25,000)
One mark (A1) for 2628

Interest earned = 3.504% x 3 x £25,000 M1

= £2,628 A1 (2)

Question Answer Mark

Number
1 (c) One mark (M1) for (380000 - 200000)
One mark (M1) for this divided by (200000 x 15)
One mark (A1) for 6%

Increase = £380,000 - £200,000 M1

= £180,000

Rate of increase = £180,000 / (£200,000 x 15) M1

= 0.06
= 6% pa A1 (3)

ASE3003
4 3_2015
Question Answer Mark
Number
1 (d) This is a ‘show that’ question, so:
One mark (M1) for seeing 1.044
One mark (M1) for seeing 1.04415
One mark (M1) for seeing
(200,000 x their 1.04415)

Proportional increase each year = 1.044 M1

Proportional increase over 15 years = 1.04415 M1

2015 value based on 4.4% = £200,000 x 1.04415 M1 (3)

= £381,537.72

Alternative mark scheme:

One mark (M1) for seeing (380000 / 200000)
One mark (M1) for seeing 15“1.9” or “1.9”1/15
One mark (M1) for seeing (“1.044” – 1)

380,000 / 200,000 = 1.9 M1

15
1.9 = 1.0437 M1

1.0437 – 1 M1 (3)
= 0.044 = 4.4%

Question Answer Mark

Number
1 (e) One mark for the word (less) or equivalent,
provided the context supplied does not make this
incorrect.

The true rate of compound interest is less than A1 (1)

4.4% pa

TOTAL FOR QUESTION 1 – 13 MARKS

ASE3003
5 3_2015
Question Answer Mark
Number
2 (a) One mark (M1) for (65250 / 87)
One mark (M1) for this times (3 x 4)
One mark (M1) for this divided by 65250
One mark (A1) for 13.8%
or greater accuracy (13.7931%)

4% stock:

Nominal value of stock purchased

= $65,250 x $100 = $75,000 M1
$87

Total interest earned = 4% x 3 years x $75,000 M1

= $9,000

Total percentage yield

= $9,000 x 100% = 13.8% M1 A1
$65,250 (4)

Question Answer Mark

Number
2 (b) One mark (M1) for (102600 x 25)
One mark (M1) for this divided by (4.5 x 4.75)
One mark (M1) for 102600 divided by this
One mark (A1) for 85.50 or 85.5 or £85.50 or
£85.5

4¾% stock:

Total interest earned = £102,600 x 25% M1

= £25,650

Nominal value purchased = £25,650 = £120,000 M1

4.5 x 4.75%

£100 of stock bought for

£102,600 x £100 = £85.50 M1 A1
£120,000 (4)

ASE3003
6 3_2015
Question Answer Mark
Number
2 (c) One mark (M1) for (7500 x 5)
One mark (M1) for this times 1.1
One mark (M1) for (7500 x 8.2)
One mark (A1) for 61912.50 or 61912.5

Nominal value of shares = 7,500 x £5 = £37,500 M1

Broker’s commission
= £37,500 x 1.1% = £412.50 M1

Cost before commission

= 7,500 x £8.20 = £61,500 M1

Cost including commission

= £61,500 + £412.50 = £61,912.50 A1 (4)

TOTAL FOR QUESTION 2 – 12 MARKS

ASE3003
7 3_2015
Question Answer Mark
Number
3 (a) One mark (M1) for either correct expression
One mark (M1) for equating expressions for costs
for methods X and Y
One mark (A1) for 4000

With Q representing the level of output, total cost

(£) is given by:

Method X: 395 x Q + 840,000 M1

Method Y: 350 x Q + 1,020,000

395 x Q + 840,000 = 350 x Q + 1,020,000 M1

Q = 4,000 units per period A1 (3)

Question Answer Mark

Number
3 (b) One mark (A1) for either reason
One mark (A1) for (less than 4000) or (less than
their answer (a)), conditional upon earning the
‘reason’ A1 mark

The higher variable costs are less important at low A1

levels of production, and the lower fixed costs are
more important.

So, Method X should be used when production and A1 (2)

sales are less than 4,000 units per period.

Question Answer Mark

Number
3 (c) (i) One mark (M1) for (470 - 350)
One mark (M1) for (1020000 / this)
One mark (A1) for 8500

Contribution per unit = £470 - £350 = £120 M1

Break even = £1,020,000 / £120 M1

= 8,500 units per period A1 (3)

ASE3003
8 3_2015
Question Answer Mark
Number
3 (c) (ii) One mark (M1) for (8500 - 7000)
One mark (M1) for this times 120
One mark (A1) for 180000
One mark (A1) for (loss) conditional on 180000

Number of units short of break even

= 8,500 – 7,000 = 1,500 M1

Loss = 1,500 x £120 M1

Loss = £180,000 A1 A1
(4)

Alternative mark scheme

One mark (M1) for (7000 x 470)
One mark (M1) for (1020000 + 7000 x 350)
One mark (A1) for 180000
One mark (A1) for (loss) conditional on 180000

Income = 7,000 x £470 = £3,290,000 M1

Expenditure = £1,020,000 + 7,000 x £350 M1

= £3,470,000

Profit/Loss = £3,290,000 - £3,470,000

Loss = £180,000 A1 A1
(4)

Alternative mark scheme

One mark (M1) for (7000 x 120)
One mark (M1) for (840000 - 1020000)
One mark (A1) for 180000
One mark (A1) for (loss) conditional on 180000

Total contribution = 7,000 x £120 = £840,000 M1

Profit/Loss = £840,000 - £1,020,000 M1

Loss = £180,000 A1 A1
(4)

TOTAL FOR QUESTION 3 – 12 MARKS

ASE3003
9 3_2015
Question Answer Mark
Number
4 (a) (i) One mark (M1) for (38270 / 8600)
One mark (A1) for (4.45 : 1) (ratio form)

Current ratio

= Current assets = £38,270 = 4.45 : 1 M1 A1

Current liabilities £8,600 (2)

Question Answer Mark

Number
4 (a) (ii) One mark (M1) for (8170 / 8600)
One mark (A1) for (0.95 : 1) (ratio form)

Acid test ratio

= cash + bank + debtors = £8,170 = 0.95 : 1 M1 A1

current liabilities £8,600 (2)

Question Answer Mark

Number
4 (a) (iii) One mark (M1) for (86320 / 132800)
One mark (A1) for 0.65 or 65% or 0.65 : 1

Borrowing (gearing) ratio

= Total borrowings = £86,320 = 0.65 M1 A1

Net worth £132,800 (2)

Alternative mark scheme

One mark (M1) for (86320 / 219120)
One mark (A1) for 0.39... or 39% or 0.39 : 1

Borrowing (gearing) ratio

= Total borrowings = £86,320 = 0.39 M1 A1

Net worth + mortgage £219,120 (2)

ASE3003
10 3_2015
Question Answer Mark
Number
4 (a) (iv) One mark (M1) for the 4 correct figures and signs
One mark (A1) for 125000

Value of premises

= £189,450 – (£19,000 + £12,100 + £33,350) M1

= £125,000 A1 (2)

Question Answer Mark

Number
4 (a) (v) One mark (M1) for 3 correct figures and signs
One mark (A1) for 12200

Net profit = £132,800 - £130,000 + £9,400 M1

= £12,200 A1 (2)

Question Answer Mark

Number
4 (b) One mark (M1) for (2 x 26250)
One mark (M1) for (this – 30100)
One mark (A1) for 22400

Total of end of year stock for year 1 and year 2

= 2 x £26,250 = £52,500 M1

Stock at end of year 2 = £52,500 - £30,100 M1

= £22,400 A1 (3)

TOTAL FOR QUESTION 4 – 13 MARKS

ASE3003
11 3_2015
Question Answer Mark
Number
5 (a) One mark (M1) for (230000 – 40000 – 3 x 60000)
One mark (M1) for (12 x this / 60000)
One mark (A1) for 4 years
One mark (A1) for 2 months

After 4 years, Project A has paid back

(£40,000 + 3 x £60,000) = £220,000

Investment outstanding = £230,000 - £220,000 M1

= £10,000

Number of months in year 5

= 12 x £10,000 / £60,000 = 2 months M1

Payback period = 4 years 2 months A1 A1

(4)

Question Answer Mark

Number
5 (b) One mark (A1) for correctly stating the better
investment, based on their (a), together with a
correct (explicit) statement of which is shorter

Project B is a better investment, as the payback A1 (1)

period is shorter.

Question Answer Mark

Number
5 (c) One mark (M1) for showing the cost as a negative
present value
One mark (M1) for (outflow x discount factor) for
any year, or for years 2-5 calculated together by
adding discount factors, 3.067 x 60000 (184020)
One mark (A1) for 8940
One mark (A1) for negative, conditional on 8940

Year Inflow/ Discount Present

(Outflow) factor value

Year 0 (230,000) 1 (230,000) M1

Year 1 40,000 0.926 37,040 M1
Year 2 60,000 0.857 51,420
Year 3 60,000 0.794 47,640
Year 4 60,000 0.735 44,100
Year 5 60,000 0.681 40,860

Net present value = (8,940) A1 A1

(4)

ASE3003
12 3_2015
Question Answer Mark
Number
5 (d) One mark (M1) for (35000 - 25000)
One mark (M1) for (this times 0.926)
One mark (A1) for 17000

Increase in year 1 cash inflow

= £35,000 - £25,000 = £10,000 M1

Increase in net present value = £10,000 x 0.926 M1

= £9,260

Revised net present value = £7,740 + £9,260

= £17,000 A1 (3)

Alternative mark scheme (using payback

period to calculate year 4 inflow)
One mark M1 for (15000 x 4)
One mark (M1) for (35000 x 0.926)
One mark (A1) for 17000

In year 4, cash inflow required for payback

= £150,000 – (£25,000 + £50,000 + £60,000)
= £15,000

Cash inflow required for payback 3 months into

year 4
= £15,000 x (12 months / 3 months) M1
= £60,000

Revised present value in year 1

= £35,000 x 0.926 M1
= £32,410

Revised net present value = £17,000 A1 (3)

TOTAL FOR QUESTION 5 – 12 MARKS

ASE3003
13 3_2015
Question Answer Mark
Number
6 (a) (i) One mark (M1) for (171580 - 22220)
One mark (A1) for 149390

Amount owed to unsecured creditors

= £171,580 - £22,220 M1

= £149,360 A1 (2)

Question Answer Mark

Number
6 (a) (ii) One mark (M1) for (104368 – 22220)
One mark (A1) for 82148

Assets available for unsecured creditors

= £104,368 - £22,220 M1

= £82,148 A1 (2)

Question Answer Mark

Number
6 (a) (iii) One mark (M1) for (their (a)(ii) / their (a)(i))
One mark (A1) for £0.55 or 55p (including units)

Rate in the pound paid to unsecured creditors

= £82,148 / £149,360 M1

= £0.55 A1 (2)

Question Answer Mark

Number
6 (b) (i) One mark (M1) for (69930 / 0.6)
One mark (A1) for 116550

Amount owed to unsecured creditors

= £69,930 / 0.6 M1

= £116,550 A1 (2)

ASE3003
14 3_2015
Question Answer Mark
Number
6 (b) (ii) One mark (M1) for (194850 – “116550”)
One mark (A1) for 78300

Amount owed to secured creditors

= £194,850 - £116,550 M1

= £78,300 A1 (2)

Question Answer Mark

Number
6 (b) (iii) One mark (M1) for (“78300” + 69930)
One mark (A1) for 148230

Total assets available for creditors

= £78,300 + £69,930 M1

= £148,230 A1 (2)

TOTAL FOR QUESTION 6 – 12 MARKS

ASE3003
15 3_2015
Question Answer Mark
Number
7 (a) One mark (M1) for annual depreciation = 12000
One mark (A1) for 4 correct figures in the
cumulative depreciation column
One mark (A1) for 4 correct figures for years 1 to
4 in the book value column

Depreciation Cumulative Book value

Year for each year depreciation at year end
0 49,500
1 12,000 12,000 37,500 M1
2 12,000 24,000 25,500
3 12,000 36,000 13,500
4 12,000 48,000 1,500 A2 (3)

ASE3003
16 3_2015
Question Answer Mark
Number
7 (b) One mark (M1) for (13500 / 37500)
One mark (M1) for (square root of “0.36”)
One mark (M1) for (1 – “0.6”)
One mark (A1) for (Clive is correct)

Ratio of book values, 2 years apart

= £13,500 / £37,500 = 0.36 M1

One year ratio of book values = 0.36 = 0.6 M1

Depreciation rate = 1 – 0.6 = 0.4 = 40% M1

Clive is correct A1 (4)

Alternative mark scheme (confirming Clive’s

figures):
One mark (M1) for (0.4 x 37500)
One mark (M1) for (37500 - “15000”)
One mark (M1) for correctly arriving at 13500
One mark (A1) for (Clive is correct)

Depreciation in year 2 = 0.4 x £37,500 = £15,000 M1

Book value at the end of year 2

= £37,500 - £15,000 = £22,500 M1

Depreciation in year 3 = 0.4 x £22,500 = £9,000

Book value at the end of year 3

= £22,500 - £9,000 = £13,500 M1

Clive is correct A1 (4)

ASE3003
17 3_2015
Question Answer Mark
Number
One mark (M1) for (0.6 x 13500) or
(0.64 x 13500)
One mark (A1) for 8100
7 (c) (i)
M1
Scrap value = (1 – 0.4) x £13,500
A1 (2)
= £8,100

Question Answer Mark

Number
One mark (M1) for (37500 / 0.6) or
(37500 / 0.64)
One mark (A1) for 62500
7 (c) (ii)
M1
Initial cost = £37,500 / (1 – 0.4)
A1 (2)
= £62,500

Question Answer Mark

Number
7 (c) (iii) One mark (M1) for (“62500” x 0.4) or
(“62500” x 0.36)
One mark (A1) for 25000
M1
Depreciation in year 1 = £62,500 x 0.4
A1 (2)
= £25,000

TOTAL FOR QUESTION 7 – 13 MARKS

ASE3003
18 3_2015
Question Answer Mark
Number
8 (a) One mark (M1) for (215000 / 250000, or other
year)
One mark (A1) for each correct answer figure

Index for 2012 = 100 x 215,000 / 250,000 = 86 M1 A1

Index for 2013 = 100 x 240,000 / 250,000 = 96 A1

Index for 2014 = 100 x 300,000 / 250,000 = 120 A1 (4)

Question Answer Mark

Number
8 (b) One mark (M1) for (225000 / 250000)
One mark (A1) for 90

Index for 2010 = 100 x 225,000 / 250,000 M1

= 90 A1 (2)

Question Answer Mark

Number
8 (c) One mark (M1) for (49.5 / 45)
One mark (A1) for 1.1

Price relative for 2013 = £49.50 / £45 M1

= 1.1 A1 (2)

Question Answer Mark

Number
8 (d) One mark (M1) for either calculation
One mark (M1) for (2014 figure / 2011 figure)
(their calculated figures)
One mark (A1) for 112

Sales value (pounds sterling) for 2011

= 250,000 x £45 = £11,250,000 M1
(either)
Sales value (pounds sterling) for 2014
= 300,000 x £42 = £12,600,000

Index = 100 x £12,600,000 / £11,250,000 M1

= 112 A1 (3)

ASE3003
19 3_2015
Question Answer Mark
Number
8 (e) One mark (M1) for the full calculation
One mark (A1) for 5.6%

Percentage increase
= {(240,000 x £49.50) – (225,000 x £50)} M1
/ (225,000 x £50)

= 5.6% A1 (2)

TOTAL FOR QUESTION 8 – 13 MARKS

TOTAL FOR PAPER – 100 MARKS

ASE3003
20 3_2015