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EDUCATION DEVELOPMENT INTERNATIONAL PLC

LCCI IQ
SAMPLE PAPER
ADVANCED BUSINESS CALCULATIONS
LEVEL 3
MARKING SCHEME
_____________________________________________________________________________
DISTINCTION MARK 75%
CREDIT MARK 60%
PASS MARK 50%
TOTAL 100 MARKS
QUESTION 1
Syllabus Topic 1: Simple and compound interest (1.3)

Sum invested
Rate of interest
per annum
Time invested (years)
Final amount
(Principle + Interest)
Interest earned

Investment A
£150,000

Investment B
£110,000

Investment C
£85,000

Investment D
£43,250

3%

3.5%

4.5%

4%

5

6

5

6

£173,891

£135,218

£105,925

£54,725

£23,891

£25,218

£20,925

£11,475
M1r

Investment B
6

Amount = £110,000 x 1.035 = £135,218

M1 A1

Interest earned = £135,218 - £110,000 = £25,218

M1 A1

Investment C
Sum invested = £105,925 - £20,925 = £85,000

M1 A1
n

Time invested (n years), given by: £85,000 x 1.045 = £105,925
1

n = 1, amount = £85,000 x 1.045 = £88,825
2

n = 2, amount = £85,000 x 1.045 = £92,822
3

n = 3, amount = £85,000 x 1.045 = £96,999
4

n = 4, amount = £85,000 x 1.045 = £101,364
5

n = 5, amount = £85,000 x 1.045 = £105,925 so n = 5

M1 A1

Investment D
6

£54,725 = Sum invested x 1.04 = Sum invested x 1.26532

M1

Sum invested = £54,725 / 1.26532 = £43,250

A1

Interest earned = £54,725 - £43,250 = £11,475

M1 A1
(Total 13 marks)

3003/SAMPLE/MS

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25% x 15.20.800 M1 A1 M1 M1 (c) Dividend = {(3 + 6.000 x £9.425 + £1.000 .500 (d) Contribution = £2.50 = £168.£925 = £174 Fixed costs per period = £174 x 22.QUESTION 2 Syllabus Topic 2: Stock exchanges (2.168.775 .000} + {2% x 15.2) (a) Commission = 0.000) x £60 = £480.326.2) and (3.250 = £3.50} = £1.000 = £37 Variable costs per unit = £349 .168.75 M1 Cost of shares including commission = (15.775 Total profit = £136.12 = £136.000 x £4.75 M1 A1 (b) Income = 15.£72.326.000 / £80.960.75 .000 units (c) Contribution per unit = £1.£80 = £67.25 (d) Total profit percent per annum = 100% x £67.5)p x 15.25 = 18.350 = £2.871.000 x £4.75 A1 M1 A1 M1 A1 (Total 12 marks) QUESTION 3 Syllabus Topic 3: Business ownership (3.000 units = (28.000 / £39 = 30.£37 = £312 M1 M1 A1 M1 M1 A1 M1 M1 A1 M1 M1 A1 (Total 12 marks) 3003/SAMPLE/MS Page 2 of 5 .168.000 x £4.099 .£720 = £60 Profit on sales of 28.170.75 = £72.66% 5 x £72.800 + £2.80) + £168.£210 = £39 Break even point = £1.3) (a) Contribution per unit = £780 .000 (b) Contribution per unit = £249 .

5 days £316.750 x 365 net sales £451.£21.800 = 19.£12.901 + £21.800 M1 = 13% A1 (ii) Net purchases = £329.550 = 17.631 = £316.901 + £317.£11.550 .2) and (4.stock at end = £20.600 .050 = £317.734 x 100% net sales £451.820 M1 Average stock at cost price = ½ (stock at start + stock at end) = ½ (£20.033 + £12. A1 A1 (c) Cost of goods sold (COGS) = stock at start + net purchases .101 + £42600 = £58.550 M1 Average credit taken = average creditors x 365 = £15.800 M1 Ratio for overhead expenses = overheads x 100% = £58.820 M1 A1 (Total 15 marks) 3003/SAMPLE/MS Page 3 of 5 .QUESTION 4 Syllabus Topic 4: Profitability and liquidity (4. and is approximately 19 days.000 .631) = £21.2 days M1 A1 = 19 days (b) Average credit given is the average length of time it takes for the retailer’s creditors to pay the retailer.266 Average time in stock = average stock COGS = M1 £21.266 x 365 days = 24.734 M1 Net sales = £463.399 x 365 net purchases £317.7 days M1 = 18 days A1 (iii) Average credit given = average debtors x 365 = £23.200 = £451.3) (a) (i) Overheads = £4.

000 0.572 Present Value £ (980.074 / £74. and is not acceptable.400 526.400 228.£11. Project P is therefore recommended to proceed.2).100 M1 A1 (iii) Total assets available for creditors = £23.184 .000 M1 Payback period = 2.110 = £74.4 months A1 (b) Cost Year 1 cash inflow Year 2 cash inflow Year 3 cash inflow Year 4 cash inflow Cash flow £ (980.680 M1 A1 (ii) Assets available for unsecured creditors = £52.410 M1 A1 (Total 12 marks) 3003/SAMPLE/MS Page 4 of 5 .310 / 0.£250.870 0.£38.QUESTION 5 Syllabus Topic 5: Investment appraisal (5.680 = 55p M1 A1 (i) M1 A1 (b) Owed to unsecured creditors = £23.£11. (5.074 M1 A1 (iii) Rate in the £ paid to unsecured creditors = £1 x £41. (6.000) 400.000 .000 / £500.850 (ii) Owed to secured creditors = £64.2).000 M1 As a proportion of year 3 inflow = £350.6) (a) Cost outstanding after 2 years = £720.4) and (5.650) 302. A1 A1 A1 (Total 11 marks) QUESTION 6 Syllabus Topic 6: Bankruptcy (6.756 0.050) M1 M1 M1 M1 A1 (c) Project Q has a negative net present value at a discount rate of 15%.658 0.850 = £26.£120.800 (5.110 = £41. Project P has the shorter payback period and a positive net present value at this rate.000 800.310 + £26.950 .000 = £350.000) (82.6 = £38.100 = £49.000 .000) Discount factor (95.000 400.3) and (6.4) (a) (i) Owed to unsecured creditors = £85.7 years = 2 years 8.790 .

000 800.000 ÷ 4 = £260.000 M1 M1 Book Value 1.50 – 0.000 = 115 M1 Index for year 2006 with year 2005 as base = 100 x 345.000 780.040.000 20.000 M1 A1 (c) Depreciation of Machine B from end year 1 to end year 6 = 800.000 M1 Number of years from end year 1 to end year 6 = 5 M1 Depreciation of Machine B per year = 780.060.51) / 10.000 x 100% = 24.040.08 x (10.000 / 5 = £156.25 = 0.000 M1 Depreciation schedule (£) End of year 0 1 2 3 4 Annual Depreciation Accumulated Depreciation 0 260.060.000 x 4 M1 A1r (b) Annual depreciation = 1.000 + 156.5) (a) Price relative for year 2006 with year 2005 as base = 10.000 M1 % of cost to be written off each year = 1.5 = 90 M1 Index for year 2006 with year 2004 as base = 100 x 10.000 M1 0 260.000 260.000 1.000 520.5 = 84 M1 Index of prices: Year Index 2004 100 2005 90 2006 84 A1 (c) Index for year 2005 with year 2004 as base = 100 x 276.0275 – 1) = 2.000 – 20.2) (a) Total depreciation over five years = 1.060.000 / 276.000 = 1.QUESTION 7 Syllabus Topic 7: Depreciation of Business Assets (7.000 – 20.000 M1 Original cost of Machine B = 800.000 = £780.000 280.2).50 / 12.000 540.25 / 12.0275 Percentage increase = 100% x (1.5% 1.000 260.040. (8.50 = 1.93 M1 A1 (b) Index for year 2005 with year 2004 as base = 100 x 11.040.000 260.000 / 240.000 = £956.50 / 11.3) and (8.75% A1 M1 M1 A1r (Total 11 marks) 3003/SAMPLE/MS Page 5 of 5 .000 = 125 M1 Index of sales: Year Index 2004 100 2005 115 2006 125 (d) Relative income = 1.000 M1 A1 (Total 14 marks) QUESTION 8 Syllabus Topic 8: Index numbers (8.