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Hi John,
I’m failing to understand q3 on CVP. Especially this statement “P2 also included specific fixed overheads totalling $2,500”.Assist clarifying.
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.
hi
in the same question can you please explain wherein 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
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