Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › BPP ACCA Revision Kit pg 39 no 123
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John Moffat.
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- October 29, 2020 at 7:29 pm #593475
Could not manage to come up to the minimum revenue required and could not understand how it is explained in the answer
October 30, 2020 at 9:27 am #593507For breakeven we need the total contribution to be $9,000.
If they made maximum demand of X, the revenue would be $24,000 and the contribution would be $7,200.
If they made maximum demand of Y, the revenue would be $14,400 and the contribution would be $7,200.Given that the question wants to know the minimum revenue needed to breakeven it would therefore mean they should first make 3,000 units of Y. That would leave them needed extra contribution of 9,000 – 7,200 = $1,800 so they would get this by making X’s so as to get revenue of 1,800/0.3 = $6,000
So the total revenue needed = 14,400 + 6,000 = $20,400
October 31, 2020 at 8:26 am #593608I could not understand the part where you say ‘That would leave them needed extra contribution of 9,000 – 7,200 = $1,800’ does the 9,000 represent the Fixed Cost?
October 31, 2020 at 11:06 am #593640As I wrote in the first line of my previous reply, to achieve breakeven the total contribution must be $9,000. As always for breakeven the contribution must equal the fixed costs.
I suggest that you watch my free lectures on CVP analysis. The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.
October 31, 2020 at 3:53 pm #593672Thanks very much now I understand 🙂
November 1, 2020 at 8:36 am #593710You are welcome 🙂
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