Target Profit

Jones

Hi - I wondered if anyone could help me with the following question?

The company manufactures a product (MP17). It is manufactured in batches of 12,000 cans and makes a contribution of £42,000 per batch. Fixed costs are £56000. The company has set a target profit of £31500 from manufacturing and selling this product.

How many cans of MP17 must the company sell to reach its target of £31500?

The AAT answer is 25,000 cans. I am not clear how they got to this answer. Any help would be appreciated. Thanks

Adele69

Contribution per unit can be calculated from figures given: £42,000 contribution /12000 no of units = £3.50 per unit
Target level of Activity can then be worked out as: £31,500 profit + £56,000 fixed cost/£3.50 Cpu

Jones

Thank you so much that's great!