Fig. 1 shows how Kraft Heinz UK has summarised results for a trial range of premium sauces. The range was sold through selected supermarkets for one year. M...
Question 1 Report
Fig. 1 shows how Kraft Heinz UK has summarised results for a trial range of premium sauces. The range was sold through selected supermarkets for one year. Managers use the diagram before deciding whether the option should be supplied to more stores. Amounts are in £000. The final box is blank because the accountant has not yet completed the profit loss account.
(a) Define the term loss. [3]
(b) Calculate the gross profit for the premium sauce range. [4]
(c) Calculate the final profit or loss for the range. Show your working. [4]
(d) State two reasons why sales revenue may be lower than managers expected during a trial. [3]
(e) Analyse whether Kraft Heinz should extend the range to all supermarkets. Use Fig. 1. [6]
Answer Details
(a) A loss is a negative financial result: relevant costs or expenses are greater than revenue, so the business does not make a profit. [3]
(b)
\[\text{Gross profit}=£72\,000-£44\,000=£28\,000\]
[4]
(c)
\[£28\,000-£33\,000=-£5\,000\]
The range makes a loss of \(£5\,000\). [4]
(d) Sales revenue in a trial may be lower than expected because customers do not know about the new sauces, the price is higher than competing sauces, limited stores reduce availability, or consumers prefer established products. Any two valid reasons gain credit. [3]
(e) Extending to more supermarkets could increase access and sales. Higher sales may spread operating expenses over more units. However, the trial makes a \(£5\,000\) loss: gross profit of \(£28\,000\) does not cover \(£33\,000\) operating expenses. A wider launch may also increase marketing and distribution costs.
Kraft Heinz should first improve sales volume or reduce costs, then extend only if forecasts show gross profit will cover all expenses. [6]
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