A Marginal Cost Card
2.1. Prepare a marginal cost card showing selling price, variable costs, and contribution per unit for each product. (3 marks)2.2. Calculate the break-even point (BEP) for each product (3 marks)2.2.1. Using your calculations of the Break Even Point (BEP) for each product create a CVP chart that shows the BEP graphically. (3 marks)2.2.2. Using your calculations and graphs of the BEP for each product comment on the Director’s concern about the level of demand and operational gearing levels for each product. (2 marks2.2.3. The fixed overheads are apportioned based on the floor space used by each relevant product team, do you have any suggestions that will reduce operational gearing and improve profitability? (2 marks)2.2.4. Why is it important to tightly control overheads and work to keep operational gearing as low as possible? (3 marks)2.3. Calculate the contribution per kg of scarce resource and give a ranking to each product (the first has the highest contribution per kg). (3 marks)2.4. Prepare a budgeted production schedule and a marginal cost income statement (analysed by product) for 2021 assuming that the Gamma contract is honoured. (5 marks)2.5. Prepare budgeted production schedule and a marginal cost income statement (analysed by product) for 2021 assuming that the Gamma contract is not honoured.(5 marks)2.6. Advise the company, with brief justification, whether to honour the Gamma contract or not based on your analysis. (1 mark)
