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Section A
Answer one question from this section.
1. Fishers
Fishers manufactures baseball caps. In 2017, it sold 75 000 caps. The variable cost per cap was
$6. 70 % of Fishers’s annual sales occur from April to September. Starting in March, Fishers
experiences a significant increase in current assets and current liabilities, which start to decrease
in October.
Table 1: Selected data for Fishers for 2017 (figures in $000s)
Sales revenue $900
Fixed costs $55
Table 2: Selected forecasted financial information for Fishers for 2018
Increase in number of baseball caps sold 10 %
Increase in variable costs per cap $1.00
Fixed costs $55 000
Interest $30 000
Income tax expense 20 % of net profit before tax
Sales price per cap will remain the same as in 2017.
[Source: © International Baccalaureate Organization 2018]
(a) Define the term current assets. [2]
(b) Using Table 1, calculate Fishers’s net profit before interest and tax for 2017 (show all
your working). [2]
(c) Using Table 2, calculate the following forecasted figures for 2018:
(i) sales revenue; [1]
(ii) total variable costs; [1]
(iii) income tax; [1]
(iv) net profit after interest and tax. [1]
(d) Explain why Fishers experiences a significant increase in current assets and current
liabilities from March to October. [2]
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2. Visionary Toys (VT)
Visionary Toys (VT) produces highly innovative toys for children. VT began operation in January
2017 and its unique selling point/proposition (USP) is producing toy parts with a 3D printer. The
financial director presented financial information for VT at the end of 2017. He was concerned
about VT’s liquidity.
Table 1: Revenue and expense information for the year 2017 and balance sheet items at
31 December 2017
Cash $1000
Net fixed assets $27 000
Interest paid $250
Creditors $4000
Debtors $3500
Accumulated retained profit
$10 000
– end of 2017
Costs of goods sold $7500
Sales revenue $27 250
Short-term loans $1500
Overdraft balance $2000
Expenses $7000
Share capital $13 500
Dividends paid $2500
Long-term liabilities $5000
Stock of toy parts $4500
[Source: © International Baccalaureate Organization 2018]
(a) Define the term unique selling point/proposition (USP). [2]
(b) (i) Construct a fully labelled balance sheet for VT for the end of 2017. [5]
(ii) Calculate the acid test (quick) ratio for VT for 2018. [1]
(c) Explain one way VT could improve its liquidity. [2]
Turn over
