Financial Performance - CBT sample assessment 2

Chrissi

Hi,

can anyone please help me with question 1.8 on this assessment.

I am stuck on the following:

Option 1:
Sales Price: £70
Volume: 10,000
variable material: £20
variable labour: £10
fixed overhead: £24

Option 2:
Sales Price: £90
Volume: 6,000
variable material: £20
variable labour: £10
fixed overhead: £40

1) What profit can be achieved if the price is set at £70. The demand is 10,000 units but only 8,000 units can be produced.
2) An overseas supplier has offered to produce 4,000 at £45.
What profit can be achieved if price is set at £70. The demand is 10,000 units. 6,000 units willl be produced and 4,000 units will be bought.

Thank you very much for your help. It is driving me insane as my exam is on Thurday and I just can't get the right answer (80000 and 100000).

Chrissi

Nps

Have only looked at part 1 so far, but remember that the fixed costs per unit are based on 10,000 units being budgeted for, so work out the total fixed costs on that basis. Then calculate the contribution per unit, multiply that by the number of units actually produced/sold, then subtract the fixed costs as calculated above. This will give you your £80,000 profit.

Nps

Part 2 is very similar - the same fixed costs (remember calculated on the basis of 10,000 units being produced). Multiply the contribution of the units bought in, add that to the contribution of those produced in house, and subtract your £240,000 of fixed costs again, to get the profit of £100,000.

Chrissi

Hi Nps,

Thank you so much. It took me a while to get my head around it but I got it now. Thanks a lot.

Regards
Chrissi

hmarsh2

Hi I too am struggling to understand question1. The total fixed cost would be £153,600 (24/10000*8000=19.20*8000) Contribution per unit is £70-30=£40. Nps is saying multiply this by the number of units so £40*8000=320000-153600=£166,400. Could you please explain further how the £80000 is calculated.

SandyHood

The total fixed cost is £240,000

You can find this from either option
1. 10,000 x £24/unit
or
2. 6,000 x £40/unit

At a contribution of £40 per unit if you sell 8,000 your total contribution is £320,000
Less £240,000 fixed cost
Leaves £80,000 profit

samdy@sandyhood.com

SandyHood

SandyHood said:

The total fixed cost is £240,000



You can find this from either option

1. 10,000 x £24/unit

or

2. 6,000 x £40/unit



At a contribution of £40 per unit if you sell 8,000 your total contribution is £320,000

Less £240,000 fixed cost

Leaves £80,000 profit



sandy@sandyhood.com

hmarsh2

Thank you very much Sally. That now makes perfect sense

alfredsoo1

Im stuck on the [url=http://www.esixsigma.org]lean six sigma[/url] exact same question, and my brain has also stopped working

leption

I did my FP exam today and I'm sure I've failed it. The written parts seemed easier than the calculations. I've practiced so much and understood the subject (or thought i did).

kgomotso_mosweu

m writing mi FP exam in two weeks i really do not know where to start please help with any strategy on how to study FP m not looking forward on failing this module......

kgomotso_mosweu

m writing mi FP exam in two weeks i really do not know where to start please help with any strategy on how to study FP m not looking forward on failing this module......

hmarsh2

I did my FP exam on Wednesday which went quite well. Keep practising the aat sample assessments and the green light area and eventually you will start to remember how to do the calculations. Practice practice practice

kgomotso_mosweu

Thank you ....but the report writing part is giving me a headache are the questions on the practice assesment the same as for exam(report writing)?