Steve Mabungo owns a service station in Kisumu County. Steve is has learnt that the new...

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Steve Mabungo owns a service station in Kisumu County. Steve is has learnt that the new new Governor, elected on a platform of environmental conservation has vowed to enact new legislation requiring mandatory testing of cars for emmission of pollutants. Steve is consifering leasing a machine that will allow him to offer customers the mandatory emissions tests. Everyone knows the Governor's resolve and expect the legislation to take force soon. Every car in the state must be tested every two years. The machine costs Ksh 60,000 per month to lease. The variable cost per test (i.e., per car inspected) is Kshs 100. The amount that Steve can charge each customer is set by County law, and is currently Kshs 400. Required a) How many inspections would Steve have to perform monthly to break even? 3 marks b) Refer to the information in a) above. How many inspections would Steve have to perform monthly to generate a profit of Kshs30,000 3 marks c) Discuss the limitations of Cost-Volume-Profit (CVP) as a tool of analysis 3 marks d) Using clear examples, explain the following cost concepts and terminologies. -Cost driver -Conversion costs -Prime costs 2 marks 2 marks 2 marks Steve Mabungo owns a service station in Kisumu County. Steve is has learnt that the new new Governor, elected on a platform of environmental conservation has vowed to enact new legislation requiring mandatory testing of cars for emmission of pollutants. Steve is consifering leasing a machine that will allow him to offer customers the mandatory emissions tests. Everyone knows the Governor's resolve and expect the legislation to take force soon. Every car in the state must be tested every two years. The machine costs Ksh 60,000 per month to lease. The variable cost per test (i.e., per car inspected) is Kshs 100. The amount that Steve can charge each customer is set by County law, and is currently Kshs 400. Required a) How many inspections would Steve have to perform monthly to break even? 3 marks b) Refer to the information in a) above. How many inspections would Steve have to perform monthly to generate a profit of Kshs30,000 3 marks c) Discuss the limitations of Cost-Volume-Profit (CVP) as a tool of analysis 3 marks d) Using clear examples, explain the following cost concepts and terminologies. -Cost driver -Conversion costs -Prime costs 2 marks 2 marks 2 marks

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The detailed answer for the above question is provided below a To break even Steve would have to per... View the full answer