Refer to Table 2 and lines 52–57. Calculate the forecast total contribution from the proposed order for fresh juice.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2022). The mark or mark type is shown in brackets.

1. [5] (a) Correct answer (units not required). Working not required. $1.8m
2. [4] (a) Statement of correct calculation. 19.5(m) – 17.7(m)
3. [3] (a) TR & TVC. 19.5(m) & 17.7(m)
4. [2] (a) Total variable cost OR 17.7(m)
5. [2] (a) Unit variable cost AND Revenue. 0.59 & 19.5(m)
6. [1] (a) Unit variable cost OR 0.59
7. [1] (a) Total variable cost of fruit OR $12(m)
8. [1] (a) Total variable cost of labour OR $2.7(m)
9. [1] (a) Total variable cost of packaging OR $3(m)
10. [1] (a) Revenue OR 19.5(m)
11. [1] (a) Correct formula (Total contribution = Contribution per unit X total sold OR Contribution per unit = selling price – variable cost OR Total revenue – total variable costs = total contribution)
12. [1] (a) Calculations: Revenue = 0.65 X 30m = ($)19.5m
13. [1] (a) Calculations: Unit variable costs = 0.40 + 0.09 + 0.10 = ($)0.59
14. [2] (a) Calculations: Total variable cost = 0.59 X 30m = ($)17.7m
15. [4] (a) Calculations: Total contribution = 19.5m – 17.7m
16. [5] (a) Calculations: = $1.8m
17. [4] (a) (Common answers) Missed transport costs $4.8m
18. [4] (a) (Common answers) Missed labour cost $4.5m
19. [4] (a) (Common answers) Missed fruit cost $13.8m
20. [0] (a) OFR (Own Figure Rule)
21. [1] (b) (Knowledge) Meaning of 'special order' in general, i.e. 'one off' factors in making the decision:
22. [1] (b) (Knowledge) Available capacity / capacity utilisation
23. [1] (b) (Knowledge) Unit and total contribution to fixed costs
24. [1] (b) (Knowledge) Impact on profit
25. [1] (b) (Knowledge) Possibility of future orders
26. [1] (b) (Knowledge) Impact on production of other products
27. [1] (b) (Knowledge) Relevance of timescale for order
28. [1] (b) (Application) Reference to and use of results.
29. [1] (b) (Application) Contribution is $1.8m
30. [1] (b) (Application) Additional revenue of $19.5m
31. [1] (b) (Application) Current spare capacity 24m litres
32. [1] (b) (Application) Capacity utilisation 80%
33. [1] (b) (Application) Capacity utilisation with special order will be 105%, so over full capacity (126/120 x 100)
34. [1] (b) (Application) Sales of juice have not met growth target.
35. [1] (b) (Application) Labour turnover problems.
36. [1] (b) (Application) Delivery required in first three months of 2023.
37. [1] (b) (Application) Order will not be APF branded.
38. [1] (b) (Application) Annual fixed costs of $12m.
39. [1] (b) (Application) Availability of fruit to meet the order from APF farms or other suppliers.
40. [1] (b) (Application) Fresh juice has a short shelf-life.
41. [1] (b) (Application) 30m litres is full capacity for first quarter.
42. [1] (b) (Analysis) Special order will add to profit but could more have been added if juice was sold at usual selling price of $0.85.
43. [1] (b) (Analysis) Impact on existing customers. As order will take APF over capacity then may be unable to meet existing customer needs resulting in dissatisfied customers and therefore loss of future sales.
44. [1] (b) (Analysis) Special order may lead to future orders which will increase sales and profit.
45. [1] (b) (Analysis) Limited time available for delivery of the juice increases the chance that it could cause disruption to other customer orders.
46. [1] (b) (Analysis) Output is increasing each year. If this trend continues then APF will soon reach capacity. This will be more valuable than accepting the special order.
47. [1] (b) (Analysis) The order would take up capacity for 3 months stopping fulfilment of other orders.
48. [1] (b) (Analysis) Order will increase market share in US which is their leading market so will consolidate their position and reputation.
49. [1] (b) (Evaluation) Recommendation with supporting argument.
50. [1] (b) (Evaluation) Elements that the evaluation/judgement might depend on: Contribution is positive so worth considering.
51. [1] (b) (Evaluation) Elements that the evaluation/judgement might depend on: Total contribution will only add $1.8m to profit if other forecast orders can also be met.
52. [1] (b) (Evaluation) Elements that the evaluation/judgement might depend on: Can APF start production now to fulfil the order? Depends on shelf-life of the product, which is likely to be short (fresh juice).
53. [1] (b) (Evaluation) Elements that the evaluation/judgement might depend on: To fulfil the order APF may have to increase capacity resulting in more fixed costs.
54. [1] (b) (Evaluation) Elements that the evaluation/judgement might depend on: To what extent might special order lead to more sales in future?
55. [1] (b) (Evaluation) Elements that the evaluation/judgement might depend on: Fruit is a seasonal product so will APF be able to meet the order?
56. [1] (b) (Evaluation) Elements that the evaluation/judgement might depend on: Short/long term impact on APF
57. [1] (b) (Evaluation) Elements that the evaluation/judgement might depend on: Evaluation of other factors that might influence the decision.
58. [0] (b) OFR (Own Figure Rule) from response to 2(a) applies.