,Part A-a
Statement of Profit or Loss
Description VCO (R) FCWater (R) Husk (R) Total (R)
Revenue 9,240,000 6,930,000 550,000 16,720,000
Cost of Sales (3,605,700) (5,823,900) (132,000) (9,561,600)
Gross Profit 5,634,300 1,106,100 418,000 7,158,400
Distribution Costs (65,625) (84,375) – (150,000)
Net Profit before
5,568,675 1,021,725 418,000 7,008,400
Admin
Administrative Costs – – – (250,000)
Net Profit 5,568,675 1,021,725 418,000 6,758,400
Part A-b
1. Labour welfare and industrial action risk
CNC relies on a labour-intensive de-husking process, which has resulted in workers—
particularly older employees—experiencing muscle strain and injuries. The company’s
refusal to cover medical expenses exposes it to significant ethical and social
responsibility concerns, as it reflects poor regard for employee well-being. This
situation increases the likelihood of industrial action, such as strikes or work
stoppages, which can disrupt production schedules and reduce output. Furthermore,
unresolved labour issues may attract negative publicity, damage stakeholder trust, and
expose CNC to potential legal liabilities under labour and occupational health
regulations. In the long term, this could also affect employee morale, increase staff
turnover, and raise recruitment and training costs.
, 2. Supply chain instability risk
CNC’s dependence on small-scale farmers for raw coconuts introduces vulnerability
into its supply chain. Dissatisfaction among farmers regarding compensation—
particularly during periods of supply shortages—has already resulted in the loss of
several high-quality suppliers. This creates a risk of inconsistent supply, both in
terms of quantity and quality. A weakened supplier base may force CNC to source from
less reliable or more expensive alternatives, increasing input costs and reducing profit
margins. Additionally, supply instability can interrupt production processes, delay order
fulfilment, and ultimately weaken CNC’s ability to meet contractual obligations,
especially in competitive international markets.
3. Sustainability and compliance risk
The increased use of pesticides by farmers, driven by adverse weather conditions,
has resulted in some raw coconuts failing to meet CNC’s sustainability standards. This
presents a serious compliance risk, particularly given that European customers
demand strict adherence to environmental and ethical sourcing requirements. The
need for formal certification further heightens this risk. Failure to comply may lead to
rejection of exports, loss of key international buyers, and damage to CNC’s brand
reputation as a sustainable and ethically responsible company. Over time, this could
erode CNC’s competitive advantage in premium markets that prioritise
environmentally conscious sourcing.
4. Product quality and wastage risk
Environmental challenges and compromised farming practices have led to a decline
in the quality of raw coconuts supplied to CNC. This increases the likelihood of higher
wastage during processing, as substandard inputs may not yield acceptable
outputs. Increased wastage directly raises production costs and reduces operational
efficiency, as more inputs are required to achieve the same level of output. In addition,
variability in input quality can negatively affect the consistency and standard of final
products, potentially leading to customer dissatisfaction, returns, or loss of market
share. This risk ultimately impacts both profitability and CNC’s reputation for quality in
international markets.
Statement of Profit or Loss
Description VCO (R) FCWater (R) Husk (R) Total (R)
Revenue 9,240,000 6,930,000 550,000 16,720,000
Cost of Sales (3,605,700) (5,823,900) (132,000) (9,561,600)
Gross Profit 5,634,300 1,106,100 418,000 7,158,400
Distribution Costs (65,625) (84,375) – (150,000)
Net Profit before
5,568,675 1,021,725 418,000 7,008,400
Admin
Administrative Costs – – – (250,000)
Net Profit 5,568,675 1,021,725 418,000 6,758,400
Part A-b
1. Labour welfare and industrial action risk
CNC relies on a labour-intensive de-husking process, which has resulted in workers—
particularly older employees—experiencing muscle strain and injuries. The company’s
refusal to cover medical expenses exposes it to significant ethical and social
responsibility concerns, as it reflects poor regard for employee well-being. This
situation increases the likelihood of industrial action, such as strikes or work
stoppages, which can disrupt production schedules and reduce output. Furthermore,
unresolved labour issues may attract negative publicity, damage stakeholder trust, and
expose CNC to potential legal liabilities under labour and occupational health
regulations. In the long term, this could also affect employee morale, increase staff
turnover, and raise recruitment and training costs.
, 2. Supply chain instability risk
CNC’s dependence on small-scale farmers for raw coconuts introduces vulnerability
into its supply chain. Dissatisfaction among farmers regarding compensation—
particularly during periods of supply shortages—has already resulted in the loss of
several high-quality suppliers. This creates a risk of inconsistent supply, both in
terms of quantity and quality. A weakened supplier base may force CNC to source from
less reliable or more expensive alternatives, increasing input costs and reducing profit
margins. Additionally, supply instability can interrupt production processes, delay order
fulfilment, and ultimately weaken CNC’s ability to meet contractual obligations,
especially in competitive international markets.
3. Sustainability and compliance risk
The increased use of pesticides by farmers, driven by adverse weather conditions,
has resulted in some raw coconuts failing to meet CNC’s sustainability standards. This
presents a serious compliance risk, particularly given that European customers
demand strict adherence to environmental and ethical sourcing requirements. The
need for formal certification further heightens this risk. Failure to comply may lead to
rejection of exports, loss of key international buyers, and damage to CNC’s brand
reputation as a sustainable and ethically responsible company. Over time, this could
erode CNC’s competitive advantage in premium markets that prioritise
environmentally conscious sourcing.
4. Product quality and wastage risk
Environmental challenges and compromised farming practices have led to a decline
in the quality of raw coconuts supplied to CNC. This increases the likelihood of higher
wastage during processing, as substandard inputs may not yield acceptable
outputs. Increased wastage directly raises production costs and reduces operational
efficiency, as more inputs are required to achieve the same level of output. In addition,
variability in input quality can negatively affect the consistency and standard of final
products, potentially leading to customer dissatisfaction, returns, or loss of market
share. This risk ultimately impacts both profitability and CNC’s reputation for quality in
international markets.
