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1 markCost-Volume-Profit (CVP) Analysis

CAPE Accounting Unit 2 · 2008 · Paper 2 · Question 3(c)(iv)

Cork Hill Company produces three products (BP, PM, WD) using the same raw material costing $3 per kg, with a monthly limit of 5,000 kg available.

Cork Hill Company would like to maximize its income from the production of the three products. State the criteria that should be used by the company to allocate the 5 000 kg of raw materials among the three products.

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Other parts of this question

  1. 3(a)(i)Describe FOUR benefits that a business may gain from budgeting.[4 marks]
  2. 3(a)(ii)Distinguish between 'ideal' and 'practical standards'.[4 marks]
  3. 3(a)(iii)Identify the factors that should be considered in setting the standard cost for a product or service.[3 marks]
  4. 3(b)(i)Compute the contribution margin.[2 marks]
  5. 3(b)(ii)Calculate the number of children who must be enrolled in order for the centre to break even.[4 marks]
  6. 3(b)(iii)Calculate the margin of safety in dollars AND as a percentage of budgeted revenue, if the budgeted enrolment of the day care centre is 135 children.[5 marks]
  7. 3(c)(i)Determine the amount of raw materials (in kg) needed to produce ONE unit of EACH product.[3 marks]
  8. 3(c)(ii)Determine the contribution margin per kg of material used in EACH product.[3 marks]
  9. 3(c)(iii)Prepare a schedule showing the total direct materials that will be required to produce the units estimated to be sold during the following month.[3 marks]
  10. 3(c)(v)Determine the amount of EACH product that Cork Hill Company should produce during the following month.[3 marks]

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