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# Financial Performance Online exam 2 Help

jodyewhite
AAT Student Posts:

**35**
Hi All

Can anyone help with Task 8 on the online exam 2, parts A-C.

Many Thanks

Can anyone help with Task 8 on the online exam 2, parts A-C.

Many Thanks

0

## Comments

3208(a) Calculate the profit achieved if the price is set at £90 and the demand is 6,000 units

This is the right column: Sales Price x No of Units less Total Cost x No of Units

8(b) Calculate the profit achieved if the price is set at £70 and the demand is 10,000 units but the factory can only produce 8,000 unitsThis is the left column: though since No of Units is 8,000 where the fixed production cost is £24 for 10,000 units it will still be £240,000 divided by 8,000 units equal £30 per unit produced, so Total Cost is £60 for option 1

8(c) Calculate the profit achieved if the price is set at £70 with demand for 10,000 units, manufacturing 6,000 units and purchasing 4,000 units from the overseas supplier. An overseas supplier has offered to manufacture 4,000 units at a price of £45.This is similar to 8b. The fixed production cost of £240,000 divided by 6,000 units equal £40 per unit produced, so the Total Cost is £70 which as the price is also £70 is break-even. The profit is entirely derived from the overseas produced units as Sales Price less Overseas Cost of Production x No of Units.

35Thank you for your answer, I can see now how they get the 8A answer. Sorry I still don't understand parts b and c, I'm dreading next week. :-(

Many Thanks

JO

3208(b) in option 1 it gives the fixed production overhead as £24 based on 10000 units which totals £240,000, so at production limited to only 8,000 units would be £240,000/8,000 = £30 per unit + variable costs for material £20 and labour £10 means total unit cost is £60. Production 8,000 units at £70 sales price = £560,000 - 8,000 units at £60 total unit cost £480,000 = Profit £80000

8(c) using same principles in option 1 for 6,000 units the FOH would be more than £30 per unit. Based on £240,000/6,000 units = £40 per unit + same variable costs of £20 and £10 = £70. So the sales price and total cost are the same so breakeven for produced units. Bought from overseas is given at cost £45 per unit and sales price is £70 so £70 - £45 = £25 x 4,000 units bought in = £100,000

35JO