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

Costs and cost behaviour — practice question

B Limited is a manufacturing business that applies marginal costing techniques and produces three products, Ess, Tee and Ewe. The budgeted monthly data below are available.
(a)[3]

Calculate the contribution per unit for each of the three products.

(b)[3]

Prepare a statement showing the maximum monthly contribution and maximum monthly profit that B Limited can achieve.

(c)[1]

Calculate the monthly direct labour hours that B Limited needs in order to satisfy the budgeted maximum monthly demand.

(d)[11]

Calculate the maximum contribution and maximum profit for December 2021, taking into account the limited direct labour hours available.

(e)[4]

Calculate the total contribution and total profit for the month of December 2021 if the directors decide to carry out this proposal.

(f)[4]

Explain two disadvantages to a business of giving its employees a bonus payment.

(g)[4]

Explain two disadvantages to a business of using a system of budgetary control.

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