Financial Performance Task 9 of CBT sample 1 Target profit margin

Ly21Ly21 New MemberPosts: 18Registered
Does anyone know how to do the part b? what calculations do I need to do to know what price to set, in order to achieve the target profit margin?? It's confusing.

Thank you :001_smile:

Comments

  • SandyHoodSandyHood Font Of All Knowledge Posts: 2,034Registered, Moderator
    I imagine you know that the £40 price alternative has a production overhead target cost of £8,000,000
    And that the £50 price alternative has a production overhead target cost of £9,460,000

    Do you appreciate what these values mean?

    If we can get the production overhead cost down to £9,460,000 then the £50 price alternative will make the required 30% profit (and the £40 alternative will not)
    For the £40 price alternative to generate the 30% required profit, fixed production overheads must be down to £8,000,000

    The answer must be £50

    So no calculations needed, just understanding about the meaning of the answer to part (a)

    Just think about those businesses that locate on low rent sites. The lower the cost the more attractive the location.

    [email protected]

    Sandy
    [email protected]
    www.sandyhood.com
    soph81
  • MmeFroggyMmeFroggy Posts: 8Registered
    Hi Sandy, would you please be able to explain answers pf part a too as I cannot get my head round it :( thank you
  • SandyHoodSandyHood Font Of All Knowledge Posts: 2,034Registered, Moderator
    Mme Froggy
    I have use a tabular layout
    To help this stay in the columns I used, I have put it into a word document which I haven't been able to attach.
    Sorry, I don't seem able to use the "attach file" facility
    I have it in a word doc format. If you'd like it please email me.
    I hope it helps
    This is a fundamental aspect of target costing, so I recommend that you ask your lecturer or distance learning provider for more questions for you to practice on.
    Yours

    Sandy
    [email protected]

    Sandy
    [email protected]
    www.sandyhood.com
  • MmeFroggyMmeFroggy Posts: 8Registered
    Thank you Sandy. I have sent you an email
  • brynbryn Posts: 1Registered
    Hello Sandy , I would be grateful if you could send the workings to part A to me too.
  • SandyHoodSandyHood Font Of All Knowledge Posts: 2,034Registered, Moderator
    Dear Bryn

    I don't look on this forum very often. And I don't have your email.
    I will reply with the word doc if you email me.
    Yours
    Sandy

    [email protected]
    Sandy
    [email protected]
    www.sandyhood.com
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