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AAT Practice Assessment 2, Task 8 (1.8) b)ii/ Required Sales Volume units

RobinARobinA Registered Posts: 2
in Management Accounting: Decisions and Control
I get how to work this out (Total Fixed costs / Target Fixed Cost per unit, so 145,000/5.75) but as I get an answer of 25217.391 it doesn't make sense to me to round it down to 25,217 (which is the answer they give). 25,217 units sold would only give £144,997.75 which does not (quite) cover the required Fixed Costs (£145,000). So surely you need to make one more: 25,218?

Answers

  • fedemennifedemenni MAAT, AATQB Posts: 94
    RobinA said:

    I get how to work this out (Total Fixed costs / Target Fixed Cost per unit, so 145,000/5.75) but as I get an answer of 25217.391 it doesn't make sense to me to round it down to 25,217 (which is the answer they give). 25,217 units sold would only give £144,997.75 which does not (quite) cover the required Fixed Costs (£145,000). So surely you need to make one more: 25,218?

    as theory you always round down if it is less than 5, so I think here they applied the same principle even thought logically doesn't sound really correct. As you mention doesn't really over the full cost but it might be a very small difference .
  • CornishPixieCornishPixie Registered, MAAT, AATQB, AAT Licensed Accountant Posts: 116
    But you can't sell a part unit - and the question states "to the nearest whole unit". Therefore you would need to round down.
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