Accounting Multiple Choice Question – 25 March 2022

A company has fixed costs of £8,000, which will only increase when production exceeds 40,000 units.

It makes and sells 20,000 units of a single product.

Each unit has a selling price of £10 and has a contribution to sales ratio of 40%.

By how much does the profit increase if it makes and sells 30,000 units?

Select ONE answer:

1. £32,000
2. £40,000
3. £92,000
4. £120,000

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct – £10 @ 40% = £4 * 10,000 units ===> £40,000
3. Not correct
4. Not correct

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