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

Costs and cost behaviour — practice question

Mandeep runs two manufacturing businesses.
(a(i))[1]

State what is meant by variable costs in a business.

(a(ii))[1]

State what is meant by fixed costs in business.

(a(iii))[1]

State what is meant by semi-variable costs in business.

(b)[3]

Calculate the total maximum contribution and the total maximum profit Mandeep can earn in December 2022.

(c)[1]

Calculate the total material (in metres) needed to satisfy the maximum demand in December 2022.

(d)[6]

Prepare a statement showing the maximum contribution and the maximum profit Mandeep can earn in December 2022, after taking the material shortage into account.

(e)[7]

Advise Mandeep whether or not he should buy all future material supplies from the overseas supplier. Justify your answer.

(f)[5]

Calculate the price per unit Mandeep should charge customers to achieve a $20\%$ profit margin.

(g)[3]

State three advantages to a business of preparing budgets.

(h)[2]

State two limitations of budgetary control.

Worked solution & mark scheme

This 30-mark question has a full step-by-step worked solution and mark scheme. One marking point: Costs move in direct proportion with activity

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