Cambridge International AS & A Level ACCOUNTING 9706 / 43 Paper 4 Cost and Management Accounting October/November 2023 MARK SCHEME Maximum Mark: 50 Published 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, which woul d have considered the acceptability of alternative answers. Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for Teachers. Cambridge International will not enter into discussions about these mark schemes. Cambridge International is publishing the mark schemes for the October/November 2023 series for most Cambridge IGCSE, Cambridge International A and AS Level components , and some Cambridge O Level components. This document consists of 14 printed pages. [Turn over © UCLES 2023

Cambridge International AS & A Level
ACCOUNTING 9706 / 43
Paper 4 Cost and Management Accounting October/November 2023
MARK SCHEME
Maximum Mark: 50
Published
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, which woul d have
considered the acceptability of alternative answers.
Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.
Cambridge International will not enter into discussions about these mark schemes.
Cambridge International is publishing the mark schemes for the October/November 2023 series for most
Cambridge IGCSE, Cambridge International A and AS Level components , and some Cambridge O Level
components.
This document consists of 14 printed pages.
© UCLES 2023 [Turn over

9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023 PUBLISHED Generic Marking Principles These general marking principles must be applied by all examiners when marking candidate answers. They should be applied alongside the specific content of the mark scheme or generic level descriptors for a question. Each question paper and mark scheme will als o comply with these marking principles. GENERIC MARKING PRINCIPLE 1: Marks must be awarded in line with: • the specific content of the mark scheme or the generic level descriptors for the question • the specific skills defined in the mark scheme or in the generic level descriptors for the question • the standard of response required by a candidate as exemplified by the standardisation scripts. GENERIC MARKING PRINCIPLE 2: Marks awarded are always whole marks (not half marks, or other fractions). GENERIC MARKING PRINCIPLE 3: Marks must be awarded positively : • marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit is given for valid answers which go beyond the scope of the syllabus and mark scheme, referring to your Team Leader as appropriate • marks are awarded when candidates clearly demonstrate what they know and can do • marks are not deducted for errors • marks are not deducted for omissions • answers should only be judged on the quality of spelling, punctuation and grammar when these features are specifically assess ed by the question as indicated by the mark scheme. The meaning, however, should be unambiguous. GENERIC MARKING PRINCIPLE 4: Rules must be applied consistently, e.g. in situations where candidates have not followed instructions or in the application of generic level descriptors. © UCLES 2023 Page 2 of 14

9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023
PUBLISHED
Generic Marking Principles
These general marking principles must be applied by all examiners when marking candidate answers. They should be applied alongside the
specific content of the mark scheme or generic level descriptors for a question. Each question paper and mark scheme will als o comply with these
marking principles.
GENERIC MARKING PRINCIPLE 1:
Marks must be awarded in line with:
• the specific content of the mark scheme or the generic level descriptors for the question
• the specific skills defined in the mark scheme or in the generic level descriptors for the question
• the standard of response required by a candidate as exemplified by the standardisation scripts.
GENERIC MARKING PRINCIPLE 2:
Marks awarded are always whole marks (not half marks, or other fractions).
GENERIC MARKING PRINCIPLE 3:
Marks must be awarded positively :
• marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit is given for valid answers which go beyond
the scope of the syllabus and mark scheme, referring to your Team Leader as appropriate
• marks are awarded when candidates clearly demonstrate what they know and can do
• marks are not deducted for errors
• marks are not deducted for omissions
• answers should only be judged on the quality of spelling, punctuation and grammar when these features are specifically assess ed by the
question as indicated by the mark scheme. The meaning, however, should be unambiguous.
GENERIC MARKING PRINCIPLE 4:
Rules must be applied consistently, e.g. in situations where candidates have not followed instructions or in the application of generic level
descriptors.
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9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023 PUBLISHED GENERIC MARKING PRINCIPLE 5: Marks should be awarded using the full range of marks defined in the mark scheme for the question (however; the use of the fu ll mark range may be limited according to the quality of the candidate responses seen). GENERIC MARKING PRINCIPLE 6: Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should not be awarded with grade thre sholds or grade descriptors in mind. © UCLES 2023 Page 3 of 14

9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023
PUBLISHED
GENERIC MARKING PRINCIPLE 5:
Marks should be awarded using the full range of marks defined in the mark scheme for the question (however; the use of the fu ll mark range may
be limited according to the quality of the candidate responses seen).
GENERIC MARKING PRINCIPLE 6:
Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should not be awarded with grade thre sholds or
grade descriptors in mind.
© UCLES 2023 Page 3 of 14

9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023 PUBLISHED Social Science - Specific Marking Principles (for point - based marking) 1 Components using point - based marking: • Point marking is often used to reward knowledge, understanding and application of skills. We give credit where the candidate’s answer shows relevant knowledge, understanding and application of skills in answering the question. We do not give credit where the answer shows confusion. From this it follows that we: a DO credit answers which are worded differently from the mark scheme if they clearly convey the same meaning (unless the mark scheme requires a specific term) b DO credit alternative answers/examples which are not written in the mark scheme if they are correct c DO credit answers where candidates give more than one correct answer in one prompt/numbered/scaffolded space where extended writing is required rather than list - type answers. For example, questions that require n reasons (e.g. State two reasons …). d DO NOT credit answers simply for using a ‘key term’ unless that is all that is required. (Check for evidence it is understood and not used wrongly.) e DO NOT credit answers which are obviously self - contradicting or trying to cover all possibilities f DO NOT give further credit for what is effectively repetition of a correct point already credited unless the language itself is being tested. This applies equally to ‘mirror statements’ (i.e. polluted/not polluted). g DO NOT require spellings to be correct, unless this is part of the test. However spellings of syllabus terms must allow for c lear and unambiguous separation from other syllabus terms with which they may be confused (e.g. Corrasion/Corrosion) 2 Presentation of mark scheme: • Slashes (/) or the word ‘or’ separate alternative ways of making the same point. • Semi colons (;) bullet points (•) or figures in brackets (1) separate different points. • Content in the answer column in brackets is for examiner information/context to clarify the marking but is not required to ea rn the mark (except Accounting syllabuses where they indicate negative numbers). © UCLES 2023 Page 4 of 14

9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023
PUBLISHED
Social Science - Specific Marking Principles
(for point - based marking)
1 Components using point - based marking:
• Point marking is often used to reward knowledge, understanding and application of skills. We give credit where the candidate’s answer
shows relevant knowledge, understanding and application of skills in answering the question. We do not give credit where the answer
shows confusion.
From this it follows that we:
a DO credit answers which are worded differently from the mark scheme if they clearly convey the same meaning (unless the mark
scheme requires a specific term)
b DO credit alternative answers/examples which are not written in the mark scheme if they are correct
c DO credit answers where candidates give more than one correct answer in one prompt/numbered/scaffolded space where extended
writing is required rather than list - type answers. For example, questions that require n reasons (e.g. State two reasons …).
d DO NOT credit answers simply for using a ‘key term’ unless that is all that is required. (Check for evidence it is understood and not used
wrongly.)
e DO NOT credit answers which are obviously self - contradicting or trying to cover all possibilities
f DO NOT give further credit for what is effectively repetition of a correct point already credited unless the language itself is being tested.
This applies equally to ‘mirror statements’ (i.e. polluted/not polluted).
g DO NOT require spellings to be correct, unless this is part of the test. However spellings of syllabus terms must allow for c lear and
unambiguous separation from other syllabus terms with which they may be confused (e.g. Corrasion/Corrosion)
2 Presentation of mark scheme:
• Slashes (/) or the word ‘or’ separate alternative ways of making the same point.
• Semi colons (;) bullet points (•) or figures in brackets (1) separate different points.
• Content in the answer column in brackets is for examiner information/context to clarify the marking but is not required to ea rn the mark
(except Accounting syllabuses where they indicate negative numbers).
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9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023 PUBLISHED 3 Calculation questions: • The mark scheme will show the steps in the most likely correct method(s), the mark for each step, the correct answer(s) and t he mark for each answer • If working/explanation is considered essential for full credit, this will be indicated in the question paper and in the mark scheme. In all other instances, the correct answer to a calculation should be given full credit, even if no supporting working is s hown. • Where the candidate uses a valid method which is not covered by the mark scheme, award equivalent marks for reaching equivale nt stages. • Where an answer makes use of a candidate’s own incorrect figure from previous working, the ‘own figure rule’ applies: full ma rks will be given if a correct and complete method is used. Further guidance will be included in the mark scheme where necessary an d any exceptions to this general principle will be noted. 4 Annotation: • For point marking, ticks can be used to indicate correct answers and crosses can be used to indicate wrong answers. There is no direct relationship between ticks and marks. Ticks have no defined meaning for levels of response marking. • For levels of response marking, the level awarded should be annotated on the script. • Other annotations will be used by examiners as agreed during standardisation, and the meaning will be understood by all exami ners who marked that paper. © UCLES 2023 Page 5 of 14

9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023
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3 Calculation questions:
• The mark scheme will show the steps in the most likely correct method(s), the mark for each step, the correct answer(s) and t he mark
for each answer
• If working/explanation is considered essential for full credit, this will be indicated in the question paper and in the mark scheme. In all
other instances, the correct answer to a calculation should be given full credit, even if no supporting working is s hown.
• Where the candidate uses a valid method which is not covered by the mark scheme, award equivalent marks for reaching equivale nt
stages.
• Where an answer makes use of a candidate’s own incorrect figure from previous working, the ‘own figure rule’ applies: full ma rks will be
given if a correct and complete method is used. Further guidance will be included in the mark scheme where necessary an d any
exceptions to this general principle will be noted.
4 Annotation:
• For point marking, ticks can be used to indicate correct answers and crosses can be used to indicate wrong answers. There is no direct
relationship between ticks and marks. Ticks have no defined meaning for levels of response marking.
• For levels of response marking, the level awarded should be annotated on the script.
• Other annotations will be used by examiners as agreed during standardisation, and the meaning will be understood by all exami ners
who marked that paper.
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9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023 PUBLISHED ANNOTATIONS The following annotations are used in marking this paper and should be used by examiners. Annotation Use or meaning  Correct and relevant point made in answering the question. × Incorrect point or error made. LNK Two statements are linked. REP Repeat A An extraneous figure N0 No working shown AE Attempts evaluation R1 Required item 1 R2 Required item 2 OF Own figure EVAL Evaluation NAQ Not answered question BOD Benefit of the doubt given. SEEN Noted but no credit given Highlight Highlight Off page Off page comment Comment © UCLES 2023 Page 6 of 14

9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023
PUBLISHED
ANNOTATIONS
The following annotations are used in marking this paper and should be used by examiners.
Annotation Use or meaning
 Correct and relevant point made in answering the question.
× Incorrect point or error made.
LNK Two statements are linked.
REP Repeat
A An extraneous figure
N0 No working shown
AE Attempts evaluation
R1 Required item 1
R2 Required item 2
OF Own figure
EVAL Evaluation
NAQ Not answered question
BOD Benefit of the doubt given.
SEEN Noted but no credit given
Highlight Highlight
Off page Off page comment
Comment
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9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023 PUBLISHED Abbreviations and guidance The following abbreviations may be used in the mark scheme: OF = own figure. The answer will be marked correct if a candidate has correctly used their own figure from a previous part or ca lculation. W = working. The working for a figure is given below. Where the figure has more than one mark associated with it, the working w ill show where individual marks are to be awarded. CF = correct figure. The figure has to be correct i.e. no extraneous items have been included in the calculation Extraneous item = an item that should not have been included in a calculation, including indirect expenses such as salaries in calculation of gross profit when there is one OF mark for gross profit’ Curly brackets, } , are used to show where one mark is given for more than one figure. If the figures are not adjacent, each is marked with a curly bracket and a symbol e.g. }* row = all figures in the row must be correct for this mark to be awarded Marks for figures are dependent on correct sign/direction Accept other valid responses. This statement indicates that marks may be awarded for answers that are not listed in the mark scheme but are equally valid. © UCLES 2023 Page 7 of 14

9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023
PUBLISHED
Abbreviations and guidance
The following abbreviations may be used in the mark scheme:
OF = own figure. The answer will be marked correct if a candidate has correctly used their own figure from a previous part or ca lculation.
W = working. The working for a figure is given below. Where the figure has more than one mark associated with it, the working w ill show where
individual marks are to be awarded.
CF = correct figure. The figure has to be correct i.e. no extraneous items have been included in the calculation
Extraneous item = an item that should not have been included in a calculation, including indirect expenses such as salaries in calculation of
gross profit when there is one OF mark for gross profit’
Curly brackets, } , are used to show where one mark is given for more than one figure. If the figures are not adjacent, each is marked with a
curly bracket and a symbol e.g. }*
row = all figures in the row must be correct for this mark to be awarded
Marks for figures are dependent on correct sign/direction
Accept other valid responses. This statement indicates that marks may be awarded for answers that are not listed in the mark scheme but are
equally valid.
© UCLES 2023 Page 7 of 14

9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023 PUBLISHED Question Answer Marks 1(a) Prepare the flexible budget statement for the month of April. 3 $ Sales revenue ($18 4 000/ 2 000)  2180 20 0 560 } Direct materials ($8 4 000/ 2 000)  2180 9 1 560 } Direct labour ($6 0 000/ 2 000)  2180 6 5 400 } (1) Fixed overhead ($1 8 000/ 2 000)  2180 1 9 620 (1) Total cost 17 6 580 Budgeted profit 2 3 980 (1) OF 1(b)(i) Calculate the following variances: 2 sales price Sales price variance $18 4 000 /2000 = $92 ( 2180  $92) – $19 6 200= $4360 (1) A (1) 1(b)(ii) Calculate the following variances: 2 sales volume (as a measure of change in profit) Sales volume variance $2 2 000 /2000 =$11 (2180 – $2000 )  $11= $1980 (1) F (1) 1(b)(iii) Calculate the following variances: 2 fixed overhead expenditure Fixed overhead expenditure $1 8 400 – $1 8 000 = $400 (1) A (1) © UCLES 2023 Page 8 of 14

9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023
PUBLISHED
Question Answer Marks
1(a) Prepare the flexible budget statement for the month of April. 3
$
Sales revenue ($18 4 000/ 2 000)  2180 20 0 560 }
Direct materials ($8 4 000/ 2 000)  2180 9 1 560 }
Direct labour ($6 0 000/ 2 000)  2180 6 5 400 } (1)
Fixed overhead ($1 8 000/ 2 000)  2180 1 9 620 (1)
Total cost 17 6 580
Budgeted profit 2 3 980 (1) OF
1(b)(i) Calculate the following variances: 2
sales price
Sales price variance
$18 4 000 /2000 = $92
( 2180  $92) – $19 6 200= $4360 (1) A (1)
1(b)(ii) Calculate the following variances: 2
sales volume (as a measure of change in profit)
Sales volume variance
$2 2 000 /2000 =$11
(2180 – $2000 )  $11= $1980 (1) F (1)
1(b)(iii) Calculate the following variances: 2
fixed overhead expenditure
Fixed overhead expenditure
$1 8 400 – $1 8 000 = $400 (1) A (1)
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9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023 PUBLISHED Question Answer Marks 1(b)(iv) Calculate the following variances: 2 fixed overhead volume Fixed overhead volume $1 9 620 OF – $1 8 000 = $1620 (1) F (1) 1(c) Prepare a statement to reconcile the flexible budgeted profit as calculated in (a) with the actual profit. Your 7 statement should start with the flexible budgeted profit. $ Flexible budgeted profit 2 3 980 (1)OF Sales price variance ( 4 360) A} Direct materials variance ($11 3 796 – $9 1 560) (2 2 236) A (2) Direct labour variance ($6 5 400 – 5 5 590) 9 810 F (2) Fixed overhead expenditure (400) A} Fixed overhead volume 1 620 F} (1) OF Actual profit 8 414 (1) © UCLES 2023 Page 9 of 14

9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023
PUBLISHED
Question Answer Marks
1(b)(iv) Calculate the following variances: 2
fixed overhead volume
Fixed overhead volume
$1 9 620 OF – $1 8 000 = $1620 (1) F (1)
1(c) Prepare a statement to reconcile the flexible budgeted profit as calculated in (a) with the actual profit. Your 7
statement should start with the flexible budgeted profit.
$
Flexible budgeted profit 2 3 980 (1)OF
Sales price variance ( 4 360) A}
Direct materials variance ($11 3 796 – $9 1 560) (2 2 236) A (2)
Direct labour variance ($6 5 400 – 5 5 590) 9 810 F (2)
Fixed overhead expenditure (400) A}
Fixed overhead volume 1 620 F} (1) OF
Actual profit 8 414 (1)
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9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023 PUBLISHED Question Answer Marks 1(d) Advise the directors which supplier they should choose. Justify your answer and support it with relevant 7 calculations. Calculations The unit cost for both suppliers is the same – (2.8  $13.75) = (2.5  $15.40) = $38.50 (1) The unit cost $38.5 by either supplier is lower than the budgeted cost of $42 ($8 4 000/ 2 000) and actual cost of $52.20 ($11 3 796/ 2 180) (1) Max 2 Comments The quality of materials from supplier B is better than from A (1) because of less wastage (1) Direct material of poor quality may affect the efficiency of workers as well as the quality of final product (1) The unit purchase price of supplier A is lower than B (1) Additional costs may be incurred for supplier B, i.e. import duty, freight charge and insurance (1) As delivery takes time, prompt delivery from supplier B may not be possible (1) for an urgent order (1) Max 4 Decision supported by a comment (1) Accept other valid responses. © UCLES 2023 Page 10 of 14

9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023
PUBLISHED
Question Answer Marks
1(d) Advise the directors which supplier they should choose. Justify your answer and support it with relevant 7
calculations.
Calculations
The unit cost for both suppliers is the same – (2.8  $13.75) = (2.5  $15.40) = $38.50 (1)
The unit cost $38.5 by either supplier is lower than the budgeted cost of $42 ($8 4 000/ 2 000) and actual cost of $52.20
($11 3 796/ 2 180) (1)
Max 2
Comments
The quality of materials from supplier B is better than from A (1) because of less wastage (1)
Direct material of poor quality may affect the efficiency of workers as well as the quality of final product (1)
The unit purchase price of supplier A is lower than B (1)
Additional costs may be incurred for supplier B, i.e. import duty, freight charge and insurance (1)
As delivery takes time, prompt delivery from supplier B may not be possible (1) for an urgent order (1)
Max 4
Decision supported by a comment (1)
Accept other valid responses.
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9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023 PUBLISHED Question Answer Marks 2(a)(i) Prepare a statement showing the net cash flow for each year from Year 0 to Year 3 for: 5 model IM3 Option 1 – Model IM3 Year 0 Year 1 Year 2 Year 3 $ $ $ $ Purchase price (14 1 000) } Cost of improvement (5 7 000) }(1) Sales W1 624 000 780 000 520 000 (1) row Operating cost W2 (288 000) (360 000) (240 000) (1) row Other fixed overheads W3 (261 000) (261 000) (261 000) (1) row Net cash flow (19 8 000) 75 000 159 000 19 000 (1)OF row Alternative presentation Purchase price Cost of Sales Operating cost Other fixed Net cash improvement W1 W2 overheads flow W3 $ $ $ $ $ $ Year 0 (14 1 000) } (5 7 000) } (1) (198 000) Year 1 624 000 (288 000) (261 000) 75 000 Year 2 780 000 (360 000) (261 000) 159 000 Year 3 520 000 (240 000) (261 000) 19 000 (1) col (1) col (1) col (1) OF col W1 1 2 000  $52=$62 4 000, 1 5 000  $52=$78 0 000, 1 0 000  $52=$52 0 000 W2 1 2 000  $4.80  5=$28 8 000, 1 5 000  $4.80 x5=$36 0 000, 1 0 000  $4.80 x5=$24 0 000 W3 Depreciation ($141 000 + $5 7 000)/3=$6 6 000 $32 7 000 – $6 6 000=$26 1 000 © UCLES 2023 Page 11 of 14

9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023
PUBLISHED
Question Answer Marks
2(a)(i) Prepare a statement showing the net cash flow for each year from Year 0 to Year 3 for: 5
model IM3
Option 1 – Model IM3
Year 0 Year 1 Year 2 Year 3
$ $ $ $
Purchase price (14 1 000) }
Cost of improvement (5 7 000) }(1)
Sales W1 624 000 780 000 520 000 (1) row
Operating cost W2 (288 000) (360 000) (240 000) (1) row
Other fixed overheads W3 (261 000) (261 000) (261 000) (1) row
Net cash flow (19 8 000) 75 000 159 000 19 000 (1)OF row
Alternative presentation
Purchase price Cost of Sales Operating cost Other fixed Net cash
improvement W1 W2 overheads flow
W3
$ $ $ $ $ $
Year 0 (14 1 000) } (5 7 000) } (1) (198 000)
Year 1 624 000 (288 000) (261 000) 75 000
Year 2 780 000 (360 000) (261 000) 159 000
Year 3 520 000 (240 000) (261 000) 19 000
(1) col (1) col (1) col (1) OF col
W1 1 2 000  $52=$62 4 000, 1 5 000  $52=$78 0 000, 1 0 000  $52=$52 0 000
W2 1 2 000  $4.80  5=$28 8 000, 1 5 000  $4.80 x5=$36 0 000, 1 0 000  $4.80 x5=$24 0 000
W3 Depreciation ($141 000 + $5 7 000)/3=$6 6 000
$32 7 000 – $6 6 000=$26 1 000
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9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023 PUBLISHED Question Answer Marks 2(a)(ii) Prepare a statement showing the net cash flow for each year from Year 0 to Year 3 for: 4 model IM8 Option 2 – Model IM8 Year 0 Year 1 Year 2 Year 3 $ $ $ $ Purchase price (420 000) Sales W1 624 000 936 000 520 000 (1) row Operating cost W2 (230 400) (345 600) (192 000) (1) row Other fixed overheads W3 (215 000) (215 000) (215 000) (1) row Net cash flow (420 000) 178 600 375 400 113 000 (1)OF r o w Alternative presentation Purchase price Sales Operating cost Other fixed Net cash W1 W2 overheads flow W3 $ $ $ $ $ Year 0 (420 000) } (420 000) Year 1 624 000 (230 400) (215 000) 178 600 Year 2 936 000 (345 600) (215 000) 375 400 Year 3 520 000 (192 000) (215 000) 113 000 (1) col (1) col (1) col (1) col W1 1 2 000  $52 = $62 4 000, 1 8 000  $52 = $93 6 000, 1 0 000  $52 = $52 0 000 W2 1 2 000  $4.8  4=$23 0 400, 1 8 000x$4.8x4=$34 5 600, 1 0 000  $4.8  4 = $19 2 000 W3 Depreciation $420000/3 = $14 0 000 $35 5 000 - $14 0 000 = $21 5 000 © UCLES 2023 Page 12 of 14

9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023
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Question Answer Marks
2(a)(ii) Prepare a statement showing the net cash flow for each year from Year 0 to Year 3 for: 4
model IM8
Option 2 – Model IM8
Year 0 Year 1 Year 2 Year 3
$ $ $ $
Purchase price (420 000)
Sales W1 624 000 936 000 520 000 (1) row
Operating cost W2 (230 400) (345 600) (192 000) (1) row
Other fixed overheads W3 (215 000) (215 000) (215 000) (1) row
Net cash flow (420 000) 178 600 375 400 113 000 (1)OF r o w
Alternative presentation
Purchase price Sales Operating cost Other fixed Net cash
W1 W2 overheads flow
W3
$ $ $ $ $
Year 0 (420 000) } (420 000)
Year 1 624 000 (230 400) (215 000) 178 600
Year 2 936 000 (345 600) (215 000) 375 400
Year 3 520 000 (192 000) (215 000) 113 000
(1) col (1) col (1) col (1) col
W1 1 2 000  $52 = $62 4 000, 1 8 000  $52 = $93 6 000, 1 0 000  $52 = $52 0 000
W2 1 2 000  $4.8  4=$23 0 400, 1 8 000x$4.8x4=$34 5 600, 1 0 000  $4.8  4 = $19 2 000
W3 Depreciation $420000/3 = $14 0 000
$35 5 000 - $14 0 000 = $21 5 000
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9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023 PUBLISHED Question Answer Marks 2(b) State two advantages of using the net present value (NPV) method for investment appraisal. 2 It takes into account cash flow which is more objective than profitability (1) It takes into account the time value of money (1) It takes into account all cash flows of an investment/a project (1) Max 2 Accept other valid responses. 2(c) Calculate the NPV for each model of machine. 4 NPV of IM3 Net cash Discount Present Year flow factor value $ $ 0 (198 000) 1 (198 000) } 1 75 000 0.893 66 975 } 2 159 000 0.797 126 723 } 3 19 000 0.712 13 528 }(1OF) NPV 9 226 (1OF) NPV of IM8 Net cash Discount Present Year flow factor value $ $ 0 (420 000) 1 (420 000) } 1 178 600 0.893 159 490 } 2 375 400 0.797 299 194 } 3 113 000 0.712 80 456 }(1OF) 119 140 (1OF) © UCLES 2023 Page 13 of 14

9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023
PUBLISHED
Question Answer Marks
2(b) State two advantages of using the net present value (NPV) method for investment appraisal. 2
It takes into account cash flow which is more objective than profitability (1)
It takes into account the time value of money (1)
It takes into account all cash flows of an investment/a project (1)
Max 2
Accept other valid responses.
2(c) Calculate the NPV for each model of machine. 4
NPV of IM3
Net cash Discount Present
Year flow factor value
$ $
0 (198 000) 1 (198 000) }
1 75 000 0.893 66 975 }
2 159 000 0.797 126 723 }
3 19 000 0.712 13 528 }(1OF)
NPV 9 226 (1OF)
NPV of IM8
Net cash Discount Present
Year flow factor value
$ $
0 (420 000) 1 (420 000) }
1 178 600 0.893 159 490 }
2 375 400 0.797 299 194 }
3 113 000 0.712 80 456 }(1OF)
119 140 (1OF)
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9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023 PUBLISHED Question Answer Marks 2(d) Advise the directors which model W Limited should choose. Justify your answer. 7 IM8 has a higher positive NPV than IM3 (1) IM8 is more efficient than IM3, i.e. fewer machine hours resulting in lower operating costs (1) IM8 has a higher initial outlay (1) Opportunity cost has to be considered (1) The method of financing IM8 has to be considered (1) IM3 has been used before and there is no need for training of workers, but IM8 may require training (1) IM8 is a new model and the quality of products may be better (1) IM8 has more production capacity to meet urgent sales orders (1) Max 6 for comments . Decision supported by a comment (1) Accept other valid responses. 2(e) Calculate the change in NPV of IM3 if the additional cost is incurred. 3 $ NPV of additional revenue ($18000 - $15000) x ($52 – $4.8  5) x 0.797 66 948 (1) NPV of additional improvement cost $5000  0.893 (4 465) (1) Increase in NPV 62 483 (1) OF © UCLES 2023 Page 14 of 14

9706 / 43 Cambridge International AS & A Level – Mark Scheme October/November 2023
PUBLISHED
Question Answer Marks
2(d) Advise the directors which model W Limited should choose. Justify your answer. 7
IM8 has a higher positive NPV than IM3 (1)
IM8 is more efficient than IM3, i.e. fewer machine hours resulting in lower operating costs (1)
IM8 has a higher initial outlay (1)
Opportunity cost has to be considered (1)
The method of financing IM8 has to be considered (1)
IM3 has been used before and there is no need for training of workers, but IM8 may require training (1)
IM8 is a new model and the quality of products may be better (1)
IM8 has more production capacity to meet urgent sales orders (1)
Max 6 for comments .
Decision supported by a comment (1)
Accept other valid responses.
2(e) Calculate the change in NPV of IM3 if the additional cost is incurred. 3
$
NPV of additional revenue ($18000 - $15000) x ($52 – $4.8  5) x 0.797 66 948 (1)
NPV of additional improvement cost $5000  0.893 (4 465) (1)
Increase in NPV 62 483 (1) OF
© UCLES 2023 Page 14 of 14

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