Home For AAT student members AQ 2016 Professional Diploma in Accounting Management Accounting: Decisions and Control

Practice assessment 2 - Task 8 (b) (ii)

Hi All
If total cost per unit is £12.75 and selling price is £17 and the question is, how many units need to be sold to make a profit of 25%.
The answer is 25,217, but can anyone explain how they came to 25,217 units needing to be sold to get a 25% profit margin?
I see that they need to make £428,689 (£17 x 25,217 units) to cover costs and profit.
If 25% of this is profit (£107,172) and the remaining 75% is costs (£321,517 £12.75 x 25,217 units)
But how did they do the calculation to work this out?


Comments

  • Pian32Pian32 MAAT Posts: 337
    I'm assuming you have a fixed cost figure earlier in the question oir can caluculate one? If so the units needed would be the amount needed to get the targeted fixed costs per unit of 5.75. Guessing that's around £145,000 of fixed cost.
    AAT Level 4, MAAT
    ACCA in progress
    F4- Passed Aug 2020
    F5- Planned for Dec 2020
    F6- Passed Sep 2020
    F7
    F8
    F9
  • snowy_autumnsnowy_autumn WiltshireRegistered Posts: 10
    hi, thanks for your reply.
    They have only given me the below, but the 25,217 x £12.75 total cost per unit covers the fixed costs and variable costs.

  • snowy_autumnsnowy_autumn WiltshireRegistered Posts: 10
    So I have found it, 65+45+35 = 145 fixed / £5.75 fixed costs per unit = 25,217 units.
    must have been asleep! :-)
  • Pian32Pian32 MAAT Posts: 337
    It's probably one of the things you need to look for more in level 4 than in 2+3, the questions tend to have more cases where all the information is given before the 1st part instead of only the relevant information before the appropiate part.

    Glad you found where it all fits together.
    AAT Level 4, MAAT
    ACCA in progress
    F4- Passed Aug 2020
    F5- Planned for Dec 2020
    F6- Passed Sep 2020
    F7
    F8
    F9
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