N12-3-BUSMT-SP2-ENG-TZ0-XX

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Keycap Digit Two

Paper 2

Question 1 - MaximumMarks - null

Wavin' Surfboards (WS) is a company that manufactures surfboards, founded by Brent Bass in 1978. Initially a sole proprietorship, WS transitioned into a private limited company in 1991 due to its growth. Brent, who has a laissez-faire leadership style and no formal business training, faces challenges in managing the expanding business. The company is known for its high-quality surfboards, leading to increased sales. The accountant forecasts that WS will need a larger building in two years to accommodate growth. Currently, the company has a wide span of control, and increasing production will require more managers, posing a dilemma for Brent on whether to recruit internally or externally.

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Question 1 - A

This part of the question focuses on recruitment strategies, specifically the advantages and disadvantages of internal recruitment, and methods of external recruitment.

Question 1 - A - i

Internal recruitment involves filling a job vacancy with a current employee from within the organization. One advantage of internal recruitment is that it is generally cheaper and faster than external recruitment. Employees are already familiar with the company culture and processes, reducing the need for extensive training. However, a disadvantage is that it limits the pool of applicants, potentially missing out on fresh ideas and skills that external candidates might bring. Additionally, it can create tension among employees, as promoting one person may lead to dissatisfaction among others who were not chosen.

Question 1 - A - i - Answer

One advantage of internal recruitment is that it is generally cheaper and faster than external recruitment. This is because the organization does not need to spend resources on advertising the position or conducting extensive interviews with external candidates. Additionally, internal candidates are already familiar with the company's culture and operations, which can lead to a smoother transition into the new role. One disadvantage of internal recruitment is that it limits the pool of applicants. By only considering current employees, the organization may miss out on potentially more qualified candidates from outside the company. This can also lead to a lack of new ideas and perspectives, as internal candidates may be more inclined to maintain the status quo.

Question 1 - A - i - Answer - EC

The candidate has correctly identified both an advantage and a disadvantage of internal recruitment. The explanation is clear and concise, highlighting the cost-effectiveness and speed of internal recruitment as well as the potential limitations in terms of candidate diversity and innovation. This response demonstrates a good understanding of the recruitment process and its implications for organizational growth and development.

Question 1 - A - ii

External recruitment involves sourcing candidates from outside the organization. This part of the question requires a description of one method of external recruitment.

Question 1 - A - ii - Answer

One method of external recruitment is through employment agencies. These agencies specialize in matching job seekers with potential employers. They maintain a database of candidates and use their expertise to screen and select individuals who meet the specific requirements of a job vacancy. Employers benefit from the agency's ability to quickly provide a shortlist of qualified candidates, saving time and resources in the recruitment process.

Question 1 - A - ii - Answer - EC

The candidate has accurately described the role of employment agencies in external recruitment. The explanation provides a clear understanding of how these agencies operate and the benefits they offer to employers, such as time savings and access to a pool of pre-screened candidates. This response effectively demonstrates the candidate's knowledge of external recruitment methods and their practical application in a business context.

Question 1 - B

This part of the question requires the preparation of a fully labelled break-even chart for WS at its current actual sales of 2400 units in the current building.

Question 1 - B - Answer

To prepare a break-even chart for WS at its current sales of 2400 units, we first need to calculate the total fixed costs, total variable costs, and total revenue. Total fixed costs are the sum of fixed costs and managers' salaries, which amount to $\$ 590,000 + \$ 450,000 = \$ 1,040,000$. The break-even point is calculated using the formula: $\text{Break-even point} = \frac{\text{Total Fixed Costs}}{\text{Sales Price per Unit} - \text{Variable Cost per Unit}}$ Substituting the values, we get: $\text{Break-even point} = \frac{1,040,000}{1,400 - 800} = 1,733\text{ units}$ The margin of safety is the difference between actual sales and the break-even point: $\text{Margin of Safety} = 2,400 - 1,733 = 667\text{ units}$ The break-even chart should have the following features: <ul><li>Labelled axes: The vertical axis should represent costs and revenue, while the horizontal axis represents the number of units.</li><li>Total revenue curve: A line starting from the origin, with a slope equal to the sales price per unit.</li><li>Total cost curve: A line starting from the fixed cost value on the vertical axis, with a slope equal to the variable cost per unit.</li><li>Break-even point: The intersection of the total revenue and total cost curves, marked and labelled.</li></ul>

Question 1 - B - Answer - EC

The candidate has accurately calculated the break-even point and margin of safety, demonstrating a clear understanding of the break-even analysis. The explanation of how to construct the break-even chart is detailed and includes all necessary components, such as labelled axes and curves. This response effectively communicates the candidate's ability to apply financial concepts to real-world business scenarios, reflecting a strong grasp of the topic.

Question 1 - C

This part of the question involves financial calculations related to WS's proposed new building, including contribution per surfboard, initial forecast profit, and an explanation of forecasted lower variable costs.

Question 1 - C - i

Calculate the contribution of one surfboard in the proposed new building.

Question 1 - C - i - Answer

The contribution per surfboard is calculated by subtracting the variable cost per unit from the sales price per unit. In the proposed new building, the sales price per surfboard is $\$ 1,400$ and the variable cost per unit is $\$ 750$. $\text{Contribution per surfboard} = \text{Sales price per unit} - \text{Variable cost per unit}$ $\text{Contribution per surfboard} = 1,400 - 750 = 650$ Therefore, the contribution of one surfboard in the proposed new building is $\$ 650$.

Question 1 - C - i - Answer - EC

The candidate has correctly calculated the contribution per surfboard by subtracting the variable cost from the sales price. The explanation is straightforward and clearly demonstrates an understanding of the concept of contribution, which is essential for analyzing profitability. This response is concise and accurately reflects the candidate's ability to perform basic financial calculations.

Question 1 - C - ii

Calculate the initial forecast profit for WS for its first year of operation in the proposed new building (show all your working).

Question 1 - C - ii - Answer

To calculate the initial forecast profit for WS in the proposed new building, we use the following formula: $\text{Profit} = \text{Total Revenue} - \text{Total Variable Costs} - \text{Total Fixed Costs} - \text{Managers' Salaries}$ Total Revenue is calculated as the number of units multiplied by the sales price per unit: $\text{Total Revenue} = 3,300 \times 1,400 = \$ 4,620,000$ Total Variable Costs are calculated as the number of units multiplied by the variable cost per unit: $\text{Total Variable Costs} = 3,300 \times 750 = \$ 2,475,000$ Total Fixed Costs and Managers' Salaries are given as $\$ 1,050,000$ and $\$ 600,000$ respectively. Substituting these values into the profit formula, we get: $\text{Profit} = 4,620,000 - 2,475,000 - 1,050,000 - 600,000$ $\text{Profit} = \$ 495,000$ Therefore, the initial forecast profit for WS in the proposed new building for its first year of operation is $\$ 495,000$.

Question 1 - C - ii - Answer - EC

The candidate has accurately calculated the initial forecast profit by applying the correct formula and showing all necessary workings. The step-by-step approach clearly demonstrates an understanding of how to calculate profit, taking into account all relevant costs and revenues. This response effectively communicates the candidate's ability to perform financial analysis and reflects a strong grasp of the topic.

Question 1 - C - iii

Explain why Brent's accountant forecasted lower variable costs per unit in the proposed new building.

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Standard Level

Business Management SL

Mathematics AA SL

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Higher Level

Business Management HL

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Core

Theory of Knowledge

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Ab Initio

Spanish Ab Initio

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Biology SL

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Physics HL

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Chemistry HL

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Chemistry SL

Economics HL

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Economics SL

History HL

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History SL

Geography SL

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Geography HL

Mathematics AI HL

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Mathematics AI SL

Biology HL

Psychology SL

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Psychology HL

Design Technology SL

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Design Technology HL

Physics SL

Mathematics AA HL

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Environmental Systems & Societies SL

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Sports, Exercise & Health Science HL

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Sports, Exercise & Health Science SL

English B SL

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English B HL

English A Language & Literature HL

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English Literature SL

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English A Language & Literature SL

English Literature HL

Spanish B SL

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IB BUSINESS MANAGEMENT SL, Paper 2, November, 2012, TZ0, Solved Past Paper