# Target sales volume

AAT Student, AATQB Posts: 264
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%

• Registered Posts: 24
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
• AAT Student, AATQB Posts: 264
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%
• Registered Posts: 42
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
• AAT Student, AATQB Posts: 264
edited January 2019
It is in the condition of the task at the top
Annual costs expected to be 450000

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%
• Registered Posts: 42
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.

• AAT Student, AATQB Posts: 264
edited January 2019
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%
• Registered Posts: 42
thank you
• Registered Posts: 20
edited March 2019
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

on the Osbourne question...
• Registered Posts: 20
I have sussed it! Dont worry
• Registered, AAT Student Posts: 3
So - how did you get the answer for B?

I know it should be simple but struggling with this one for some reason.
• Registered, MAAT, AATQB, AAT Licensed Accountant Posts: 117
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 = 25217.39 rounded to 25217 as you need to show full units not parts of units.

Hope that helps.