Home For AAT student members AQ 2013 AAT Level 3 (Level 6 in Scotland)

short term decision making

donnas1977donnas1977 Well-KnownRegistered Posts: 182
Can someone work the following for me on short term decision making. We have given the information below and also a sales forecast of 910,000 during the year,
Product robin
Budgeted sales and production 750,000
Machine hrs required 3,750,000
Sales revenue (£) 9,000,000
Direct materials (£) 2,250,000
Direct labour (£) 2,625,000
Variable overheads 1,500,000
Fixed costs 2,450,000

I got confused by the book how they got the contribution unit which i understand is selling price per unit – total variable cost per unit. The book gives the answer as £12 – (3+3.5+2) = 3.50.
where does this come from. I get my answer as 0.63 which doesn’t look right, can someone point me in the right direction?
Thanks
Donna

Comments

  • SandyHoodSandyHood Font Of All Knowledge Registered, Moderator Posts: 2,034
    1. Add up the three variable costs
      Direct materials (£) 2,250,000
      Direct labour (£) 2,625,000
      Variable overheads 1,500,000
    2. Sales revenue less total variable cost = total contribution
    3. Divide the total contribution by the budgeted production
    4. = £3.50 contribution per unit
    Sandy
    [email protected]
    www.sandyhood.com
  • donnas1977donnas1977 Well-Known Registered Posts: 182
    thanks, i knew i was missing another step somewhere
Sign In or Register to comment.