BFF produces a variety of computer screens, which it sells to other manufacturers. The Managing Director has been reviewing BFF’s income statement and is concerned about what an increase in material costs will do. She commented: ‘Advances in technology have made our production methods better. BFF must stay competitive because imports of computer screens are rising.’ The Managing Director must decide whether BFF ought to raise its prices.
(a)[2]
What does the term ‘income statement’ mean?
(b)[2]
State the impact of an increase in the cost of materials on each of the following:
Cost of sales:
Gross profit:
(c)[4]
Identify and explain two ways in which BFF’s managers could make use of the information in the income statement.
(d)[6]
Identify and explain two ways that changes in production technology could help BFF to stay competitive.
(e)[6]
Do you think BFF ought to increase its prices? Justify your answer.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “A financial document that shows the revenue, costs and profit for a given period of time” …