NCEA Level 1 Commerce 92030 and 92031 free practice questions with answers

Question 1 (13 marks) [Interdependent financial relationships and an event]

(a) A cyclone damages a hapū-owned apple orchard. The orchard expected to earn $300,000 from this season’s apple crop but 35% of the crop is destroyed. It has insurance that pays 70% of the value of the lost crop, but the insurer first takes off a $5,000 excess (the owner pays the first $5,000 of any claim). The orchard planned to pay 12 seasonal pickers $55,000 in total, and the pay falls in proportion to the crop lost. The orchard also repays a bank loan of $2,800 a month and has other yearly costs of $30,000. Calculate the value of the crop lost and the amount the insurer pays. Describe the relationship between the orchard and the insurer.

(a) Answer: Lost crop $105,000; the insurer pays $68,500.

• Evidence level: Achieved (finds the loss and the payout and says who pays whom).

• Value of crop lost = $300,000 × 35% = $105,000.

• Cover = $105,000 × 70% = $73,500; payout = $73,500 − $5,000 excess = $68,500.

• The orchard pays the insurer premiums and in return the insurer pays out when the event happens:

each depends on the other.

(b) Case recap: a cyclone destroys 35% of a hapū-owned apple orchard’s apple crop (expected income $300,000). Insurance pays 70% of the loss less a $5,000 excess; 12 pickers lose pay in proportion; the loan repayment is $2,800 a month and other costs are $30,000 a year. Calculate how much less the pickers are paid in total and per picker, and describe how the pickers and the orchard are affected.

(b) Answer: $19,250 less in total ($1,604 per picker).

• Evidence level: Merit (calculates the fall in pay and links it to both entities).

• Pay lost = $55,000 × 35% = $19,250.

• Per picker = $19,250 ÷ 12 = $1,604.

• The pickers lose income because the orchard has less fruit to pick; the orchard saves wages but loses far more in crop income.

(c) Case recap: a cyclone destroys 35% of a hapū-owned apple orchard’s apple crop (expected income $300,000). Insurance pays 70% of the loss less a $5,000 excess; 12 pickers lose pay in proportion; the loan repayment is $2,800 a month and other costs are $30,000 a year. Work out the orchard’s income for the year after the cyclone and the insurance payout. After the pickers (who are still paid in proportion to the crop) and the other yearly costs are paid, and then the bank repayments, is there money left? Describe the relationship with the bank.

(c) Answer: Income $263,500; after pickers’ pay and other costs $197,750, and $33,600 of repayments, the orchard is left with $164,150.

• Evidence level: Merit (puts income, costs and repayments together and links the result to the bank).

• Income after the cyclone = $195,000 remaining crop + $68,500 payout = $263,500.

• Pickers are still paid $55,000 − $19,250 = $35,750, so costs = $35,750 + $30,000 other costs = $65,750. Income − costs = $263,500 − $65,750 = $197,750. Bank repayments for the year = $2,800 × 12 = $33,600.

• Money after repayments = $197,750 − $33,600 = $164,150; the orchard can still pay the bank, so the bank relationship is not under immediate pressure.