AQ2013 Costs and Revenues (CSTR) Sample Assessment 2 questions

Canuck74

I don't know how they came up with the answers for Task 7 (a) and (d). Could someone show the workings for that question? My exam is on January 23rd. Thank you.

kkelly

HI Canuck74
If you post up your calculations and where your going wrong I'll have a look at it for you!

Canuck74

Hi kkelly,

For Task 7 (a) my calculations are CS21 16,000/17.00-8.00= 1777 x4 = 7111 miles

CS22 18.00-10.00/18.00 x 100 = 44.4%
14,500/44% = 32,658 x 4 = 130,632

(d) CS21 16,000 + 6,000/17.00-8.00 = 2444 x 4 = 9776

For CS22 I'm not sure. My calculations are way off. Thanks for your help.

CeeJaySix

7(a) - CS21
Fixed costs for quarter 1 are £16,000.
Contribution per mile is £8.
Therefore you need to do £16,000 / £8 = 2000 miles to cover all your fixed costs for the quarter (break even).
Multiply by 4 to get a figure for the whole year - 2000 x 4 = 8000 miles.

7(a) - CS22
Same method - £14,500 / £10 = 1450 miles for the quarter x 4 = 5800 miles. Multiply by the revenue per mile - 5800 x £18 = £104,400

Remember that it is the contribution per mile that goes against fixed costs - you have taken the contribution away from the revenue per mile, which actually leaves the variable cost element.

7(d) - CS21
You know you need to do 2000 miles in the quarter to break even from part a.
You need to make £6000 profit over and above this.
Profit is made up of the contribution once all fixed costs have been covered, as the remainder of the revenue covers the marginal costs.
Therefore £6000 / £8 = 750 miles to make £6k.
2000 miles (break even) plus 750 miles (for profit) = 2750 miles per quarter, x4 = 11,000 miles per year

7(d) - CS22
1450 miles per quarter to break even (part a)
£7000 miles profit per quarter / £10 per mile = 700 miles for profit.
1450 + 700 = 2150 mile per quarter x 4 = 8600 miles x £18 revenue per mile = £154,800

Does that make sense?

Canuck74

Hi CeeJaySix,

It does make sense. The calculation for contribution was already done. Thanks for the help.