Hey in Question 5, why are we clculating target cost by using the selling price when in the question it states that required mark up is 20% of cost and not selling price?

That would be a meaningless exercise. The whole point of calculating the target cost is that we would then look for ways of reducing the production cost down to the target i.e. reducing the cost gap to zero.

Did you watch the free lectures before attempting this test?

Sir please I want to ask if this working is correct even thou I arrived with the same answer.

SP = 600
And the required profit margin is 20% on cost . THIS MEANS that : COST + 20%
Where 20% = 0.2 therefore
In other to get SELLING PRICE this should be COST it self which is 100% + mark-up cost which is 20%

Therefore SP=cost x 120% and by finding the cost, Make COST the subject thin will become
COST = SP/ 120%
= 600/120%
= 500
Cost Gap = 520 – 500
= 20

(But do make sure that you buy a Revision Kit from one of the ACCA approved publishers. Our tests are just meant to be quick checks after each chapter, but it is vital that you practice lots and lots of exam standard questions. The Revision Kits are full of both past exam and other exam standard questions in the various formats that they are asked in the exam.)

I think there is a mistake in one of the questions. The question says to calculate the target cost, but in the answer it is calculated the target cost gap by 300-250=50. Is 50 the target cost? I don’t think so. It is the question about 1.250.000 investment

The answer is correct. The selling price is $300 and the required profit is $250.
Therefore the target cost in order to achieve that profit is 300 – 250 = $50.

i just read the comments below and actually they really asked us to find target cost ,not target cost gap. you may think to work on it again. As the target cost will be the difference between actual cost and target cost. but in this question and workings, it showed us on how to find a target cost. Correct me if im wrong john

The target cost is not the difference between the actual cost and the target cost. The difference is the cost gap. The question specifically asks for the target cost – it is worded correctly and the answer is correct.

hey john, just got 100%, you have made such concepts really very easy for me, just want to ask if i want to practice more this topics bpp exam kit is enough?

Best is to buy from one of the ACCA Approved Publishers – they are BPP and Kaplan. (You will find a link on other pages of this website that will give you a 20% discount on BPP books)

I have attempted and finished the 1st set of questions, but cannot seem to be able to move on to the next set of questions.
Could there possibly be a technical problem going on?

As explained in the introductory lecture for Paper PM, there is a short test to try for each chapter in our free lecture notes. However you need to practice far more question and should therefore buy a Revision Kit from one of the ACCA approved publishers.

SP=cost + profit(P)……(i)
let cost be X……(ii)
from the qn. profit is 20%of cost
so P=20%X……(iii)
then put (ii) & (iii) into (i)
Note SP=600 from the question
thus 600=X+20%X. find X
X=$520
so the diff btn $520 & $500 is the gap

LiyaJaison says

Hy Sir,

Can I do the 5th question in this way?

20% on cost. So cost+profit= sp

100 + 20 = 120 (assume cost as 100)

.

. . 20/120*600 = $100

600-100 = $500

Gap= 520-500 = $20

John Moffat says

Of course. It doesn’t matter how you do your workings.

LiyaJaison says

Okay Sir. Thank you.

Wasay411 says

Hey in Question 5, why are we clculating target cost by using the selling price when in the question it states that required mark up is 20% of cost and not selling price?

John Moffat says

The target cost is calculated from the selling price so as to give a mark-up of 20% on cost.

So the target cost is 100/120 x 600 = 500.

The actual cost is only relevant afterwards in order to compare with the target cost so as to arrive at the cost gap.

Did you watch the lecture before attempting the test?

Tejasv1997 says

Hi John,

In Q5, Why cant we simply multiply 20% with $520 to get our profit figure and subtract it with the selling price to get the target cost?

John Moffat says

That would be a meaningless exercise. The whole point of calculating the target cost is that we would then look for ways of reducing the production cost down to the target i.e. reducing the cost gap to zero.

Did you watch the free lectures before attempting this test?

nalediroy says

Hi sir,i was trying to open the quick quiz but its refusing,its jus showing a black screen.I want to attempt to the quick quiz but its failing to open

opentuition_team says

Please try another browser like chrome or edge or safari

kissme4560 says

I scored 100% thank you for the questions

kissme4560 says

Sir please I want to ask if this working is correct even thou I arrived with the same answer.

SP = 600

And the required profit margin is 20% on cost . THIS MEANS that : COST + 20%

Where 20% = 0.2 therefore

In other to get SELLING PRICE this should be COST it self which is 100% + mark-up cost which is 20%

Therefore SP=cost x 120% and by finding the cost, Make COST the subject thin will become

COST = SP/ 120%

= 600/120%

= 500

Cost Gap = 520 – 500

= 20

John Moffat says

Yes – they are the same workings as the answer 🙂

kissme4560 says

Ok sir Thanks to You

baraka42 says

Hello, Sir please is the below correct?

Seems figures are not matching but landed correct answer somehow

SP= 600

Cost= 20%

600×20% = $120

Profit is 20/120 x 600 = 100

Cost gap is 120-100= $20

John Moffat says

The fact it matches is a complete coincidence because your figures to not make sense.

The required mark-up is 20% of cost. Therefore the target cost to achieve this mark-up is 100/120 x 600 = 500.

The expected actual cost is 520.

Therefore the cost gap is 520 – 500 = 20.

angana says

100 % . Thank you for the lectures. A great initiative for people like us who cannot afford expensive classes.

jamshid265 says

Got 100%

Thank you for the lectures

John Moffat says

Thank you for your comment 🙂

chandni24 says

100%

mariamohi says

100%:)

John Moffat says

Great 🙂

(But do make sure that you buy a Revision Kit from one of the ACCA approved publishers. Our tests are just meant to be quick checks after each chapter, but it is vital that you practice lots and lots of exam standard questions. The Revision Kits are full of both past exam and other exam standard questions in the various formats that they are asked in the exam.)

singeley says

thank you, I have scored 100%, you are so clear and understanding in your lectures, keep the good work up.

karinegukaa says

100%. thanks for the lectures.

John Moffat says

Thank you for your comment 🙂

andyv says

100%.. 🙂

arusyak says

I think there is a mistake in one of the questions. The question says to calculate the target cost, but in the answer it is calculated the target cost gap by 300-250=50. Is 50 the target cost? I don’t think so. It is the question about 1.250.000 investment

John Moffat says

The answer is correct. The selling price is $300 and the required profit is $250.

Therefore the target cost in order to achieve that profit is 300 – 250 = $50.

carloseo86 says

I actually agree with you. It should be reworded and ask to calculate the target cost gap

tasya999 says

true,but if you look at the option,it is logical to think that we were asked to find cost gap. just a cliche trick in exam

tasya999 says

i just read the comments below and actually they really asked us to find target cost ,not target cost gap. you may think to work on it again. As the target cost will be the difference between actual cost and target cost. but in this question and workings, it showed us on how to find a target cost. Correct me if im wrong john

John Moffat says

The target cost is not the difference between the actual cost and the target cost. The difference is the cost gap. The question specifically asks for the target cost – it is worded correctly and the answer is correct.

davoudi says

100%

John Moffat says

Very good 🙂

(But do make sure you have a Revision Kit from one of the ACCA approved publishers, because they have many more questions for you to practice on 🙂 )

shwt2812 says

The lectures are really helpful. Thank you

John Moffat says

Thank you for your comment 🙂

urmilsanghavi says

hey john, just got 100%, you have made such concepts really very easy for me, just want to ask if i want to practice more this topics bpp exam kit is enough?

John Moffat says

Yes, it is enough. You need to work through all the questions in the Revision Kit 🙂

vrehal says

can you please tell me which publishers revision kit can i buy for pm?

John Moffat says

Best is to buy from one of the ACCA Approved Publishers – they are BPP and Kaplan. (You will find a link on other pages of this website that will give you a 20% discount on BPP books)

tumelofaith says

Good Day.

I have attempted and finished the 1st set of questions, but cannot seem to be able to move on to the next set of questions.

Could there possibly be a technical problem going on?

John Moffat says

If you mean the questions on this page (testing on the lectures for chapter 2 of the notes), then the test is working fine.

tumelofaith says

So is just these 5 questions that need to be done?

John Moffat says

As explained in the introductory lecture for Paper PM, there is a short test to try for each chapter in our free lecture notes. However you need to practice far more question and should therefore buy a Revision Kit from one of the ACCA approved publishers.

maganok says

Got 100% baby!

Thank You so much, I’m actually enjoying the notes, lecture videos and the practical quiz.

John Moffat says

Great 🙂

tom1991 says

Thanks for this valuable quiz. I got 8% of total score I failed to answer Q5

jonahex1 says

SP=cost + profit(P)……(i)

let cost be X……(ii)

from the qn. profit is 20%of cost

so P=20%X……(iii)

then put (ii) & (iii) into (i)

Note SP=600 from the question

thus 600=X+20%X. find X

X=$520

so the diff btn $520 & $500 is the gap