Cost and Revenues help please on AAT exam paper

esmith91esmith91 Settling In NicelyPosts: 16Registered
Hello

If someone could help me would be much appreciated I am stuck on the AAT exam 3 online 2.2 I can't
seem to work out how I do it if someone could tell me that would be great as have exam this week.

Thanks

Emma

Comments

  • CudeyCudey Well-Known Posts: 138Registered
    Hi Emma,

    I'll try to help.

    Firstly, you have your fixed costs. You're told 2 of them in the table being Indirect Labour and Overheads (totalling £120,000) but you also have a Semi Variable cost in this which is the drivers wages and related cost which has a fixed cost of £30,000 included.

    So total fixed cost is £150,000.

    Next is the target profit - This is provided for you. (£42,500)

    Next is the fixed cost + target profit... add the two figures above (£192,500)

    Next is Sales Revenue - again this is provided (£350,000)

    Now you have to work out the variable costs. You have 2 provided for you in the table, being the Diesel fuel and Overheads (totalling £110,000) but you also have the Drivers wages and related costs which are £60,000 in total. We know this is a semi variable cost so it has a fixed and a variable element. We are told the fixed element is £30,000 therefore £60,000 - £30,000 = £30,000.... Add this to the £110,000 and you get £140,000.

    Next you have contribution which we know is your Sales Revenue minus your variable costs. So:
    £350,000 - £140,000 = £210,000.

    Next we have contribution per mile. To work this out I took the Contribution figure (£210,000) and divided it by the Semi variable cost figure (£60,000) as we know the amount will change depending on the amount of miles travelled. This should give you £3.50

    Lastly you need to work out the number of miles required. You need to take the amount from the Fixed Costs + Target Profit (£192,000) and divide this by your contribution per mile (£3.50) which should give you £55,000

    Hope that helps - apologies if I haven't explained it well i'm a little tired! Will try to help you more tomorrow if your still stuck.
  • NpsNps Experienced Mentor Posts: 782Registered
    You can never have too many explanations so here's another one

    http://forums.aat.org.uk/showthread.php?37123-Cost-and-Revenues-Contribution&highlight
  • esmith91esmith91 Settling In Nicely Posts: 16Registered
    Thanks both for your help much appreciated and I understand it now thanks again

    Emma
Sign In or Register to comment.