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4 marksCosting and Break-Even Analysis

CAPE Management of Business Unit 2 · 2011 (Specimen) · Paper 2 · Question 2(c)(i)

The firm is considering purchasing widgets at $30 each instead of manufacturing them, leaving the factory idle. Advise the firm as to a course of action.

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Other parts of this question

  1. 2(a)(i)Using the sales level of 100 units, calculate the contribution per unit.[2 marks]
  2. 2(a)(ii)Using the sales level of 100 units, calculate the total cost.[3 marks]
  3. 2(a)(iii)Using the sales level of 100 units, calculate total profits using marginal costing format.[3 marks]
  4. 2(b)(i)With the use of a labelled diagram, illustrate the breakeven point of the firm.[5 marks]
  5. 2(b)(ii)a)Determine the number of units required for the firm to break even.[2 marks]
  6. 2(b)(ii)b)Determine the amount of sales required for the firm to break even.[2 marks]
  7. 2(b)(iii)On the same diagram in (b)(i), indicate the margin of safety. State the importance of knowing the margin of safety.[2 marks]
  8. 2(c)(ii)State TWO non-accounting factors which the firm must take into consideration when making its decision to buy rather than manufacture.[2 marks]

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