Tag: Target Profit

Accounting Multiple Choice Question – 23 December 2023

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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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:

  1. 147 sheds
  2. 72 sheds
  3. 84 sheds
  4. 218 sheds

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 4

  1. Not correct
  2. Not correct
  3. Not correct
  4. 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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