Download Full Version L3M3 CIPS Exam

Explanation

Outputs link to the concept of a performance (or 'output') specification, not a conformance specifi-cation.

Explanation

It's a retrospective rebate, and can be a highly significant way of (often hidden) discounting for many businesses - sometimes a 'life-saver'. Something to think about in an open book costing situa-tion - are there rebates to suppliers which are 'forgotten' in discussions?

Explanation

The calculation which needs to be done is one hundred thousand (dollars) divided by the contribu-tion per bottle. The contribution per bottle is one dollar minus the variable cost - 25 cents. Thus the contribution is 75 cents. One hundred thousand divided by $0.75 = 133,333. Note the answer is in units - in response to the QUESTION NO: of how many bottles / units must be sold to break even.

For people who feel they have difficulty with calculations, just look at the possible answers. If the contribution is a bit less than a dollar, and the fixed costs are 100,000, we would expect the answer to be a number a little over 100,000 - one of the answers fits the bill, and this is the correct answer. So the QUESTION NO: may look complicated or difficult, but if you stay calm and think it through, it's not that difficult.

Explanation

Cost of production, and shareholder and managerial expectations of profit, are both internal factors in decision-making. Although shareholders may be outside the firm, management will condition shareholders' expectations. Customer perception of value and the extent of marketplace competition are significantly outwith the control of the company.