2. Cost and management accounting (AS Level)
A section of Accounting, 9706
Listing 10 of 903 questions
V Limited is a manufacturing company which uses marginal costing. REQUIRED Define: marginal cost contribution break‑even point. Additional information The following information is available for a single type of product made at one of the company’s factories. Per unit $ Selling price Direct materials Direct labour Fixed costs per month are $36 900. Maximum output per month is 2500 units. The factory operates at full capacity. REQUIRED Calculate the break‑even point: in units in sales value. Additional information The directors plan to increase factory capacity to meet increased demand. The following details are available. Factory capacity will be increased by 15%. Additional machinery will be required at a cost of $72 000. Machinery is depreciated at 20% per annum on cost. The directors will apply for a bank loan of $60 000 at 8% per annum interest to finance the cost of the additional machinery. Direct materials will cost less per unit as a result of buying in greater bulk. Suppliers currently give a 20% trade discount but will give a 25% trade discount in future. Direct labour costs and selling price will remain unchanged. REQUIRED Calculate the increase in the monthly margin of safety in units, assuming all production is sold. REQUIRED Calculate the profit per month to be made under each option. Option A Option B Advise the directors which option they should choose. Justify your answer by considering both financial and non‑financial factors. Explain two advantages to a business of using absorption costing.
9706_s23_qp_23
THEORY
2023
Paper 2, Variant 3
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Questions Discovered
903