REQUIRED

1. Identify from the Breakeven chart for the year ended 30 September 2020:

• What point P represents.
• What point B represents.

2. State what is meant by P/V ratio.
3. State FOUR (4) benefits and TWO (2) drawbacks of CVP analysis.
4. Calculate for the year ended 30 September 2020:

• The total contribution for each product P, Q and R.
• The total profit or loss for each product P, Q and R.

5. Discuss whether ST Company should continue to produce all three products. Justify your answer.
6. Calculate the contribution gained or lost on order 1 and order 2.
7. Advise ST Company whether each of the orders should be accepted. Justify your decision.
8. Explain, giving two reasons, why a business needs to plan.

ST Company manufactures three products: P, Q and R. It uses cost-volume- profit (CVP) analysis in its business. It has prepared the following Breakeven chart for product P for the year ended 30 September 2020. A RM Income Costs Variable Costs B Fixed Costs a O Output The management of ST Company has provided you with the following budgeted information for the year ended 30 September 2020. P Q R Annual sales (units) 16,000 7,000 15,000 RM RM RM Selling price (per unit) 12 10 Variable cost (per unit) 8 10 7 Annual allocated fixed costs 70,000 30,000 40,000 16 ST Company is considering stopping production of P. Additional information Since preparing its budget, ST Company has received two separate orders. For order 1 the customer has offered to purchase 1,000 units of each products at the total price offered at RM23,000. For order 2 the customer has offered a lower selling price per unit for each separate product. The details are as follows: Order 2 units Proposed price per units 7 12 9 P 1,000 Q 1,000 R 1,000 ST Company has spare production capacity and the fixed costs will not be affected by the orders