Please can you advise on BPP exam kit question 93
Fixed Costs is $1,300,000
Variable costs are 55% of Sales if sales are $1,5 million, but at higher volumes of production and sales, the variable cost for incremental production is 52%
What is Breakeven point in Sales revenue?
Contribution is 45% - $675,000
This leaves $625,000 to cover of Fixed costs.
The answer in the exam kit states that we should divide $625,000 by 0,48 (which I assume proportion of $625,000 to fixed costs, 625,000/1,300,000)
The formula for BE revenue is Fixed Costs/ C/S Ratio
Shouldn't we divide £625,000 by 0.45?
Thank you
Ask the Tutor ACCA PM
Breakeven Sales Revenue
No - because for the extra production the variable costs are 52% which means that the contribution is 100 - 52 = 48%.
Thank you very much !
You are welcome :-)
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