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- This topic has 4 replies, 2 voices, and was last updated 7 years ago by Ken Garrett.
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- May 15, 2017 at 6:20 am #386196
Hi Sir,
For Q1 (ii), when we are required to calculate the number of units to cover the lost operating profit, why audit costs (0.5) and marketing campaign (0.8) are not included in calculating return from each unit?
May 15, 2017 at 9:37 am #386246Hi Sir, one more question for Q1(iii).
Sir, may I know how to get this figure $71m from the sample answer?May 15, 2017 at 1:44 pm #386282Query 1: these costs have been included when working out the new contribution per unit.
Query 2: Question Appendix 1, 2015, operating profit = 71m
May 17, 2017 at 4:51 pm #386690Hi sir, regarding to Query 1, the new contribution per unit of $51.9 is derived from [75 – 21 – (21 x 10%)].
The audit cost and marketing campaigns are not included, right?
May 18, 2017 at 8:49 am #386812These are incremental fixed costs.
Old cost structure = 75 – 21 = 54 contribution
New cost structure = 75 – 1.1 x21 = 51.9If volume didn’t change, operating profit would be down 5.5m
Extra units needed to cover that loss = 5.5/5199 = 105,973
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