- AkvoBotelo (AB)
AkvoBotelo (AB) manufactures reusable water bottles. For every water bottle that AB sells, it plants a tree. The business is a cooperative owned by its 30 employees, who are also environmental activists.
(a) State two features of a cooperative. [2]
AB’s mission statement is, “To reduce the use of plastic and to make the world greener by planting a tree for every bottle we sell”. All of AB’s packaging has this mission statement printed on it.
(b) Explain one advantage for AB of having a mission statement. [2]
Table 3 shows forecasted figures for AB.
Table 3: Forecasted figures for AB for the year ending 31 December 2025
(c) Using Table 3:
(i) comment on the effect on fixed costs if the number of bottles produced decreases to 300 000; [2]
(ii) calculate AB’s margin of safety for 2025 (show all your working); [2]
(iii) comment on the effect on the break-even quantity if the selling price of each water bottle increases to )21. [2]
AB’s management team includes a chief executive officer (CEO), a chief financial officer (CFO), and a chief personnel officer (CPO). Table 4 shows their annual salaries.
Table 4: Annual salaries of AB’s management team
Three factory supervisors are paid $21 000 per year. All remaining factory employees are paid $20 000.
The CEO has some concerns about the next two years (2025–2026):
- Because of high inflation, AB’s employees have complained that an annual salary of (20 000 is no longer enough to pay for basic necessities, such as food and rent.
- Supervisors have complained that they are not being rewarded enough for their extra responsibilities.
- One supervisor and five employees are planning to retire.
- In 2026, AB will have to make )600 000 in capital expenditure in order to increase capacity.
- Increased competition has made the reusable water bottle market more price competitive.
(d) Using the information in the stimulus, recommend a plan of action to address the CEO’s concerns for the next two years (2025–2026). [10]