Accounting 9706 · AS & A Level · Costs and cost behaviour

Costs and cost behaviour — practice question

Rahel makes one product, X, and wants to determine the break-even point.
(a)[1]

State what the meaning of break-even point is.

(b(i))[2]

Calculate the break-even point in units.

(b(ii))[2]

Calculate the break-even revenue in $.

(c)[4]

Prepare a break-even chart for product X.

(d(i))[2]

Calculate the margin of safety in units.

(d(ii))[2]

Calculate the margin of safety as a percentage.

(e)[2]

Calculate the contribution per unit for each product, Y and Z.

(f)[1]

Calculate the forecast profit for the new factory in April.

(g)[5]

Calculate the revised profit taking the limited direct labour hours into account.

(h)[5]

Advise Rahel on which option to select. Justify your answer.

Worked solution & mark scheme

This 26-mark question has a full step-by-step worked solution and mark scheme. One marking point: The point at which total costs are equal to total revenue / contribution equals fixed costs

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