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Question Arwin from Kaplan

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Question Arwin from Kaplan

  • This topic has 3 replies, 2 voices, and was last updated 7 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • November 28, 2015 at 7:15 pm #286006
    cochem
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    Good evening! I’m trying to settle Q51 Arwin from Kaplan Exam Kit for year 2015.
    In the scenario, Sales revenue equal to 50,000. Cost of sales = 30,000
    Sales revenue is expected to increase by 12% for the first year. And it is said that variable cost of sales makes up 85% of cost of sales.
    So, new revenue will be 56,000 (50,000*1,12).
    As for the VC it is said in the answer (85%* sales) = 28,560.
    Still, I can not understand, how did they get 28,560?
    Because, it this scenario means, that 85% of new level of sales we could not get 28,560.
    What I did, first I tried to calculate prior level of contribution: if COS = 30,000, then we get fixed cost 15% = 4,500. And VC = 30,000 – 4,500=25,500
    So, contribution will be 50,000 – 25,500 = 24,500
    Fixed costs won’t change, and remain 4,500.
    So, I can calculate, that previously, VC represented 51% from Sales (25,500/50,000) and I may suppose, that the same proportion will be for the new year.
    51%*56,000 = 28,560. This is the only logic I see.
    My question is, when it was written in the answer 85%* sales = 28,560 – what did they meant?
    Thank you in advance!

    November 29, 2015 at 7:38 am #286057
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51551
    • ☆☆☆☆☆

    You are misreading the question.

    The variable cost is 85% of the cost of sales – not 85% of the sales.

    The cost of sales at the moment is 30,000, so the variable cost at the moment is 85% x 30,000 = 25,500

    If the sales increase by 12%, then you would expect the variable costs to increase as well by 12%. So 25,500 x 1.12 = 28,650

    November 29, 2015 at 10:19 am #286095
    cochem
    Member
    • Topics: 1
    • Replies: 1
    • ☆

    Thank you very much!

    November 29, 2015 at 11:53 am #286119
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51551
    • ☆☆☆☆☆

    You are welcome 🙂

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