Alex Trading hopes to make £25,000 of profit next year.
One product is made: the Stafford garden shed.
Each Stafford shed is sold for £590 and has a variable cost of £240.
Monthly fixed costs are £4,275.
How many Stafford sheds does Alex Trading need to make next year and sell to achieve the target profit of £25,000?
Select ONE answer:
- 147 sheds
- 72 sheds
- 84 sheds
- 218 sheds
Show your workings to arrive at your answer, and explain and justify your reasons:
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This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 4
- Not correct
- Not correct
- Not correct
- Correct – The formula used to calculate the number of units required to achieve a target profit is — > Number of units = (annual fixed costs + target profit) / contribution per unit == > Contribution per unit = 590 – 240 = £350 per unit == > Annual fixed costs = 12 x £4,275 = £51,300 == > Number of units = (51,300 + 25,000) / 350 = 218 sheds
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