September 2016 Specimen exam

The total fixed overheads are (10,000 x 1.20) + (12,500 x 1) = 24,500 Of this total, 2,500 will only be incurred if P2 is produced. The remaining 22,000 will occur whatever is produced.

This is well understood John. Many thanks.

You are welcome :-)

hi in the same question can you please explain where in the answer contribution per unit of P is coming as 3.20+1.20=4.40 when im calculating contribution its coming as 4.4+2.6=7 maybe im missing something here could you help please. thanks

I have no idea where you are getting your figures from! Contribution is sales less variable costs: 10 - (3.50 + 1.50 + 0.60) = 4.40 (and is always the same as the profit before fixed costs: 3.20 + 1.20 = 4.40.

ya 4.4 exactly. ok sorry got it. i forgot the profit before fixed cost. so i thought maybe they are adding contribution for p2 as well. sory for the confusion thanks

No problem :-)