PEV JUNE 05 = Section 2.2

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:25AM 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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