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Pg 15 num 46 Target Cost

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Pg 15 num 46 Target Cost

  • This topic has 3 replies, 2 voices, and was last updated 4 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • May 14, 2021 at 9:22 pm #620612
    Shi2004
    Participant
    • Topics: 79
    • Replies: 33
    • ☆☆

    How to find the minimum production in this question??

    May 15, 2021 at 7:40 am #620635
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54687
    • ☆☆☆☆☆

    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.

    May 15, 2021 at 2:57 pm #620669
    Shi2004
    Participant
    • Topics: 79
    • Replies: 33
    • ☆☆

    Yes it is in BPP sir, forgot to mention it. Why 100/125 *120?

    May 16, 2021 at 9:28 am #620714
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54687
    • ☆☆☆☆☆

    Because the mark up is 25% of the cost. Therefore the selling price is 125% of the cost.

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