PEV JUNE 05 = Section 2.2

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Can anyone please explain the bit at the end after the calculation regarding the Pivotal point and how they work out the 960 Model H stoves and also the fact they can occur £82.35 of fixed costs?

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PEV JUNE 05 = Section 2.2


    104000/850 gives your original contribution of £122.35 / unit

    220-180 gives your subcontracted contribution of £40 / unit

    The difference being £82.35

    They have 2 options, they can either subcontract and get a saving of £79000 / month or carry on as they are and get an extra £82.35 per unit per month in contribution.

    The break even quantity is where the two become equal ie. 960*82.35 = 79000.

    Hence if they were to make more than this eg. 970*82.35 = £79880 then they would be better of syaying as they are and vice versa.

    Does this help atall???
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PEV JUNE 05 = Section 2.2

    Thanks Sleuthey, that really does help thank you, it seems you are well clued up and ready for these, which iw as the same. good luck anyhow.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:PEV JUNE 05 = Section 2.2


    No worries

    I have done all 5 past papers and I thought this question was the hardest of the lot. FYI The examiners report states that the answers for this question were all poor!

    Good luck

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