Registered Posts: 56
Can anyone remember how these tasks are done on FPFM practice paper 2 (2010) please?
For some reasons, I am coming up with different answers...

1-A marketing campaign is to be undertaken, at a cost of 300 000
Selling price will be reduced from £40 to£38
Current sales volume os 100 000 units per period and this is to inrease to 125 000
All the other fixed cost will remain unchanged
Labour cost and material cost are variable
Inventory levels are 0

Complete the following:
a- The additional revenue will be £.........
b-The additional contribution will be £........
c-The additional profit will be £........

Question 2.
The marketing department is concerned that the volume of sales may not reach 125 000 per period.
Complete the following:
a-The fixed costs are £....
b-The contribution per unit is £.....
c-The break even sales volume is ....... units

Believe you can and you're halfway there...

• Registered, Moderator Posts: 2,034
Blue Jeans

The revenue in each case is price x volume sold
The new revenue is £38 x 125,000
The old revenue is £40 x 100,000
The additional revenue is the difference

The contribution in each case is contribution/unit x volume sold

Find the difference again

As there is no change to production fixed costs the difference in profit will be the difference in contribution less the marketing cost £300,000

Total fixed cost (production + marketing)
divided by
contribution per unit (new price - total variable cost per unit)
=
Break even point

I hope this helps

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Thank you

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www.sandyhood.com
Sandy
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www.sandyhood.com
• Registered Posts: 56
Thanks SandyHood , it did help.
Believe you can and you're halfway there...