4

4. 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: 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]