Practice assessment 2 - Task 8 a & b

ZanaZana AAT Student Posts: 11
Hi,

Can someone please help me with the task in the attachment?
Any help would be much appreciated! Thanks you!

Comments

  • CornishPixieCornishPixie Registered, MAAT, AATQB, AAT Licensed Accountant Posts: 27
    Ok, looking at part A first::
    Total anticipated sales revenue will be £18.00 x 20,000 units = £360,000
    Target total operating profit will be £360,000 x 25% = 90,000
    Target total costs will be £360,000 - £90,000 = £270,000
    Target cost per unit (to 2 decimal places) will be £270,000 / 20,000 units = £13.50

    For part B you follow the same principles:
    Target operating profit will be 17.00 x 25% = £4.25
    Target total cost per unit will be £17.00 - £4.25 - £12.75
    Target fixed costs will be £12.75 - £7.00 = £5.75
    (in case you need to enter the figure for manufacturing costs in any other practice papers, use the £140,000 (provided in the table at the top under variable manufacturing costs) and divide it by the number of units - so £140,000 / 20,000 units = £7)

    For the last part, use the figures given in the table at the top.
    You need to know the total costs for the production of 20,000 so 65,000 + 140,000 + 45,000 + 35,000 = £285,000
    Less the variable costs (also in the table) will be £285,000 - £140,000 = £145,000 fixed costs
    You need to divide the fixed costs by the number of units so £145,000 / 20,000 = £7.25 per unit
    You can now complete the calculation by taking £145,000 / 5.75 (from first part of answer B) = 25217.39 rounded to 25217 as you need to show full units not parts of units.

    Hope that helps.
    Vickie30alexnwa
  • ZanaZana AAT Student Posts: 11
    Thank you @CornishPixie !
  • alexnwaalexnwa Registered Posts: 12
    Thank you for your in-depth explanation.@CornishPish
Sign In or Register to comment.