Cost and Revenues help please on AAT exam paper

esmith91

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

Cudey

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.

Nps

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

esmith91

Thanks both for your help much appreciated and I understand it now thanks again

Emma