Revised selling price per unit - help

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jane
jane Registered Posts: 165 Dedicated contributor 🦉
in AAT Level 3 (Level 6 in Scotland)
Oh gosh, i'm being a right numpty today.

14000 tones

If i have a target profit of £260000
Fixed costs of £155000
Target contribution is £105000

The revised contribution per unit i calculated at 105000/14000 = £7.50

How do I work out the revised selling price???? Total mind blank again

Any help or point me in the right direction would be appreciated

Thanks

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  • crispy
    crispy Registered Posts: 466 Dedicated contributor 🦉
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    Hello,

    Im afraid I don't undertsand the numbers either as the targeted profit is larger than the target contribution which can't be right. Based on those numbers they would have have to sell 20,667 tonnes to break-even and 55,333 to make the target profit. Eg.

    Break-even point: 155,000 / 7.50 = 20,667

    Target Profit:(155,000 + 260,000) / 7.50 = 55,333

    Based on the target contribution of £ 105,000 they would currently be making a loss of £ (50,000).

    Sorry that probably doen't help much.
  • mge
    mge Registered Posts: 94 Regular contributor ⭐
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    jane wrote: »
    If i have a target profit of £260000
    Fixed costs of £155000
    Target contribution is £105000

    Hi jane. This bit just doesn't make any sense.

    In order to make this target profit, total contribution would have to be £260,000 + £155,000 =
    £415,000.
  • jane
    jane Registered Posts: 165 Dedicated contributor 🦉
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    Sorry, I told you I was being a numpty!!!
    I took the total profit of £260000 - Fixed costs £155000 = £105000

    I should of taken it as 260000 + £155000 = £415000

    So revised contribution per unit is 415000/14000 = £29.64
    Hope that's right.

    Still can't figure out how to calculate the revised selling price, I've spent hours trying to find this in my book.

    If i'm still not making sense, I'm gunna shoot myself !! Lol
  • SandyHood
    SandyHood Registered, Moderator Posts: 2,034 mod
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    Jane
    1. You spotted your error, so you aren't a numpty anymore
    2. Instead of thinking that you must be wrong, how could you work out the price from the information given?
    Unless you know the variable cost per unit, how could you find the price?
    Sandy
    sandy@sandyhood.com
    www.sandyhood.com
  • jane
    jane Registered Posts: 165 Dedicated contributor 🦉
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    Thanks Sandyhood

    The variable costs are £80.90
    The revised contribution per unit is £29.64

    Therefore the new selling price should be £110.54?


    As you may have gathered I am not very confident with this unit at all, but i am so determind to get my head around this if its the last thing I do.

    Thanks goodness for this forum (home study is not so easy when you have no one to ask)
    Many thanks

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