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Hi,
Would you be able to explain to me how they come to use the figures they have for the fixed cost? The rest of the figures make sense, but their treatment of the FC makes little sense to me. I am using a slightly old revision kit, the question number may be different in the latest revision kit.
Thanks!
I do not have the BPP revision kit and so I am afraid that I cannot help you.
Hi john,
I hv got the same question. In the question, it say”sales are $1200k and contribution to sales ratio is 40% and net margin is 10%”. I need to work out the fix cost and veriable cost.
May I ask your help on this?Thanks
If the CS ration is 40%, then the contribution must be 40% x 1200 = 480.
If the net margin is 10% then the profit is 10% x 1200 = 120.
So the variable cost is 1200 – 480 = 720, and the fixed cost is 480 – 120 = 360.
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