Financial Performance  AAT Level4 Pratice Assessment 2  Question 2.3 (d)
ninja
Registered Posts: 5
Can please someone help with the belwo question:
Beta Limited is considering designing a new product, the JF007, and will use target costing to arrive at the traget cost of the product. You have been given the following information:
The answer is 35152 units.
Please help me with the above question. My exam will be tomorrow.
Many thanks in advance.
Beta Limited is considering designing a new product, the JF007, and will use target costing to arrive at the traget cost of the product. You have been given the following information:
 The price at which the product will be sold £70
 The company expect to sell 30,000 units at a price of £70
 The fixed production cost is £360,000
 The labour requirement is 1.5 hours at a cost of £18 per hour
 The required profit margin is 30%

The answer is 35152 units.
Please help me with the above question. My exam will be tomorrow.
Many thanks in advance.
0
Comments
IIRC its simply a matter of working out how many units you need for the contribution per unit to match the required profit plus fixed costs. Contribution being selling price less variable costs. As the only variable cost given is the labour rate, we cannot work out the contribution per unit. Was there something you had to calculate in an earlier part of the question that's relevant (eg. the contribution per unit, or the materials cost per unit)?
Someone please tell me if I'm way off base here.
Yes , (a) the target total production cost per units is £ 49
(b) The target variable material cost per unit is £ 10
(c) The contribution per unit is £33
Yes I have tried ,,,, Fixed cost/ contribution per unit = 360,000/33 and Fixed cost / materail per unit= 360,000/10 but the answer still not right
The answer is 35152
Many thanks for your kindness.
1160000/33
The answer is 35151.5 so rounds up to the given answer.
Remember to add on the target profit to the fixed costs. If you have the L3 costs and revenues book it will explain this in more detail with more simple examples. There should be a green light or elearning exercise on MyAAT too.
Good luck tomorrow.