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John Moffat.
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Shi2004
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How to find the minimum production in this question??
John Moffat
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I assume that you are referring to the BPP Revision Kit, but please do say in future which book you are using.
The target cost is 100/125 x $120 = $96.
The variable costs are $46 per unit, and so to achieve the target cost they have to reduce the fixed costs to 96 – 46 = $50 per unit.
The total budgeted fixed costs are 10,000 x $60 = $60,000.
So to end up with a fixed cost of $50 per unit, they need to produce 60,000/50 = 12,000 units.
Shi2004
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Yes it is in BPP sir, forgot to mention it. Why 100/125 *120?
John Moffat
- Topics: 57
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Because the mark up is 25% of the cost. Therefore the selling price is 125% of the cost.
Shi2004
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