Target sales volume

Can anyone break it down to me how you calculate the target sales volume of 38793 at the bottom?
Many thanks
AAT Level 2. 2018 Distinction
AAT Level 3. 2018 Distinction
AAT Level 4. 2019 FSLC 100% MABU 93% MADC 82% PDSY 80%
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Comments

  • ammw90ammw90 Posts: 24Registered
    Hi,

    Targeted fixed cost per unit is £11.60 and since fixed costs (in total) remained as before (£450,000):

    £450,000/£11.60 = 38793.10345 = 38793

    Let me know if you want me to break it down further :)

    A
  • dumutrobadumutroba Posts: 265AAT Student, AATQB
    Thank you very much for your input
    Much appreciated
    AAT Level 2. 2018 Distinction
    AAT Level 3. 2018 Distinction
    AAT Level 4. 2019 FSLC 100% MABU 93% MADC 82% PDSY 80%
    Xero Certified Advisor
  • jmhjmh Posts: 42Registered
    Hello,

    Can you please explain where the £450,000 came from. I am revising at the moment and stuck on the same question just the task has different figures to this one.

    Thank you
  • dumutrobadumutroba Posts: 265AAT Student, AATQB
    edited January 18
    It is in the condition of the task at the top
    Annual costs expected to be 450000

    Not sure where is it on your task though
    Apply a screenshot
    AAT Level 2. 2018 Distinction
    AAT Level 3. 2018 Distinction
    AAT Level 4. 2019 FSLC 100% MABU 93% MADC 82% PDSY 80%
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  • jmhjmh Posts: 42Registered
    Please see attached this is the task I am working on and the answer is 25,217 units but I am struggling with the fix costs. I thought it might be the 65,000+45,000+35,000 = 145,000 but am not sure.



    thank you for your help
  • dumutrobadumutroba Posts: 265AAT Student, AATQB
    edited January 18
    You are correct R&D are fixed costs, apparently Fixed manufacturing costs are fixed and end of life cost are fixed.
    All cost not directly related to production are fixed, unless they are specifically named as such, as the fixed manufacturing costs in this case
    AAT Level 2. 2018 Distinction
    AAT Level 3. 2018 Distinction
    AAT Level 4. 2019 FSLC 100% MABU 93% MADC 82% PDSY 80%
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  • jmhjmh Posts: 42Registered
    thank you
  • Dimps92Dimps92 Posts: 17Registered
    edited March 27
    Can someone explain how they got the answers to section b, I have worked out a but some reason my brain is not working properly for this section :confused:

    on the Osbourne question...
  • Dimps92Dimps92 Posts: 17Registered
    I have sussed it! Dont worry
  • JfaureJfaure Posts: 3Registered, AAT Student
    So - how did you get the answer for B?

    I know it should be simple but struggling with this one for some reason.
  • CornishPixieCornishPixie Posts: 105Registered, MAAT, AATQB, AAT Licensed Accountant
    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.
    Jfaure
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