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CVC

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › CVC

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by AvatarJohn Moffat.
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  • August 24, 2019 at 8:01 am #528589
    Avatariyamu
    Participant
    • Topics: 286
    • Replies: 171
    • ☆☆☆

    a product has the following costs:
    direct material-$15 , direct labour-$9, variable overheads-$16, fixed overheads are $9000 per month. Budgeted sales per month are 450 units to allow the product to break even.

    what is the mark up which needs to be added to marginal cost to allow the product to break even at budgeted units ?

    Solution : 50%

    Working was not clear but please correct me in my own calculations:
    Marginal costs = $40
    Contribution per unit = $20 ( $9000/450)
    To break even total contribution will be $20*450=$ 9000 which is equal to the fixed costs of $9000.

    Selling price per unit = $60 ($20+$40)
    % margin = 50% (20/40 )

    Please , it’s just my logic having spy the answer as I could not understood how % margin was formed.

    Could you correct me if my logic is wrong on % figure ? ( using contribution / variable cost

    August 24, 2019 at 11:21 am #528614
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54839
    • ☆☆☆☆☆

    From what you have typed, your calculations are correct 🙂

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