CSTR sample assesment 2 (Costs and revenues AQ2013)

Registered Posts: 10

I have been going out my mind trying to figure out the answer for 1.6 in sample assessment 2. I have managed to get the first 3 answers correct but then I hit a brick wall... I have checked the remaining answers on the "answers doc" but I cannot seem to get back to those figures no matter what I do?! Thanks!! x

• Registered Posts: 191
Are you still stuck on 1.6?

So you have already worked out:
a. Sales revenue per mile £13.00
b. Variable cost per mile £3.10
c. Fixed cost per mile (contract 15,600 miles) £3.50

d. Total cost per mile (contract 15,600 miles)
TC = VC + FC
Taking your answers from b&c, TC per mile = £3.10 + £3.50 = £6.60

e. Profit per mile (contract 18,200miles)
Profit = Sales Revenue - Total Cost

SR = 18,200 x £13* = £236,600 (*use answer from a.)
VC = 18,200 x £3.10* = £56,420 (*use answer from b.)
FC = £54,600 (given in question)
Therefore Total cost is £56,420 + £54,600 = £111,020

Total profit = £236,600 - £111,020 = £125,580
Hence, Total profit per mile based on 18,200 miles is £125,580 / 18,200 = £6.90

Hope this helps.