# Target Costing

SusieQtips
Feels At HomeRegistered Posts:

**65**
Hi

Can anyone help me with this question from the Financial Performance CBA?

Company expects to sell 30,000 units @ £70 each

Fixed production costs are £360,000

Labour is 1.5hrs @ £18 per hour

Profit Margin 30%

I've got the target production cost as £49 (£70-£21)

Target variable material cost as £10 (49-27 labour -12 fixed costs)

Contribution per unit as £33 (70-27 labour -10 material)

I am totally clueless as to how to get 'the required volume of sales (assuming the target variable cost per unit is met) to achieve a total profit of £800,000'

The answer is given as 35152.

Can anyone tell me how this figure is reached, please?

Thanks

Can anyone help me with this question from the Financial Performance CBA?

Company expects to sell 30,000 units @ £70 each

Fixed production costs are £360,000

Labour is 1.5hrs @ £18 per hour

Profit Margin 30%

I've got the target production cost as £49 (£70-£21)

Target variable material cost as £10 (49-27 labour -12 fixed costs)

Contribution per unit as £33 (70-27 labour -10 material)

I am totally clueless as to how to get 'the required volume of sales (assuming the target variable cost per unit is met) to achieve a total profit of £800,000'

The answer is given as 35152.

Can anyone tell me how this figure is reached, please?

Thanks

0

## Comments

2,034You should know that:

required profit + total fixed costs= sales volume required for required profit.......contribution per unit

So use the figures you have produced

£800,000 + £360,000= 35151.5 which rounds to 35152...........(£70-£37)

[email protected]

www.sandyhood.com

6581