Dec 2016 Q1

The total budgeted fixed overheads are 30,000 x $4 = $120,000. The total will stay the same regardless of the level of production (by definition). To make a profit of $270,000, then need therefore to make a contribution of $270,000 + $120,000 = $390,000. The contribution per unit is $10, and therefore the need to produce 390,000/10 = 39,000 units. I do suggest that you watch my free lectures on CVP analysis. The lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.