HELP CBT 4 FNPF 2.3 (d)
WAD2001
Registered Posts: 38 Epic contributor 🐘
Hi
Ive totally lost the plot :huh: with this question and am going around in circles could anyone help with a breakdown of how to get 26% for the answer. Thanks x
Ive totally lost the plot :huh: with this question and am going around in circles could anyone help with a breakdown of how to get 26% for the answer. Thanks x
0
Comments

Try this approach:
Sales needed = Fixed Cost + sales needed x £15
sales needed = contribution per unit
Contribution per unit x Sales needed = Fixed Cost + sales needed x £15
Contribution per unit x Sales needed  sales needed x £15 = Fixed cost
(Contribution per unit  £15) x Sales needed = Fixed cost
Sales needed = Fixed cost
sales needed = Contribution per unit  £15
This will give you the sales needed
Sales needed  Break even sales x 100% = margin of safety %
sales needed = Sales neededSandy
sandy@sandyhood.com
www.sandyhood.com0 
:huh::ohmy::glare:0

Hi Sandy
I'm stuck on this question myself. In your explanation you say sales needed=fixed cost + sales needed... if this is the figure we are looking for, how do we know what to input there?0 
LivePrincess My answer to the 26% was effectively algebra  using words rather than letters This answer is from my phone so I don't have access to the question at the moment. But I think I can remind you about key points about contribution. As total contribution can be found as: Total Revenue  Total Variable Cost or Contribution per unit. X Sales Volume or Fixed Costs + Profit Is that a help?Sandy
sandy@sandyhood.com
www.sandyhood.com0 
I used this question in class this week and found a useful short cut. Everything is the same for both the original scenario and the new scenario with the exception of the fixed overhead cost.
Fixed overheads in the target costing question (part c) is £270,000
The extra information then tells you that the fixed overheads are £200,000
So think for a minute... if the fixed overheads cost £270,000 the product will generate 30% profit. Absolutely, because you did the sums for (a) (b) and (c) on this basis.
Now, everything else remains the same..........except that the fixed overheads have just dropped by £70,000
And what happens when the fixed cost falls but price, variable cost per unit, and volume remain the same  yes the profit increases (by £70,000)
And what is margin of safety in revenue? The revenue over the revenue needed to achieve the 30% margin.
This means that £70,000 extra profit divided by the £270,000 is the percentage by which revenue can fall to bring the profit that the scenario with the £200,000 fixed costs before it is in line with the £270,000 fixed cost needed to achieve the 30% profit margin.
So: £70,000 = 26%
.....£270,000
An interesting way and not a bit of (obvious) algebra in site!Sandy
sandy@sandyhood.com
www.sandyhood.com0
Categories
 All Categories
 1.2K Books to buy and sell
 2.3K General discussion
 18.9K For AAT students
 265 NEW! Qualifications 2022
 147 General Qualifications 2022 discussion
 9 AAT Level 2 Certificate in Accounting
 42 AAT Level 3 Diploma in Accounting
 64 AAT Level 4 Diploma in Professional Accounting
 8.9K For accounting professionals
 23 coronavirus (Covid19)
 274 VAT
 92 Software
 274 Tax
 138 Bookkeeping
 7.3K General accounting discussion
 193 AAT member discussion
 3.8K For everyone
 38 AAT news and announcements
 352 Feedback for AAT
 2.8K Chat and offtopic discussion
 590 Job postings
 17 Who can benefit from AAT?
 36 Where can AAT take me?
 44 Getting started with AAT
 26 Finding an AAT training provider
 48 Distance learning and other ways to study AAT
 25 Apprenticeships
 65 AAT membership