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Kings College 4QQMN502 W1 Tutorial Solutions 2020-21
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Kings College 4QQMN502 W1 Tutorial Solutions 2020-21
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Introduction to Management Accounting | 4QQMN502Week 1 – Introduction and Cost-Volume-Profit Analysis
Tutorial Solutions
Question 1
(a) (140+160) / (2.2-0.2) = 150 units
(b) (300+100)/(2.2-0.2) = 200 units
(c) 250 – 150 = 100
(d) Revenue = profit + fixed costs + variable costs
Revenue = 250 + 300 + (250 x 0.2) = 600
Selling price = 600/ 250 = £2.4/unit
(e) = 50 units
Question 2
(a) Contribution per unit = £20 - £10 = £10
Break-even point in units = £60,000 / £10 = 6,000 tickets
(b) Units sold for the target profit = £60,000 + £30,000 / £10 = 9,000 tickets
(c) Total contribution from the sale of 8,000 tickets = 8,000 x £10 = £80,000
Profit = £80,000 - £60,000 = £20,000
(d) Total required revenue to obtain a profit of £30,000 = £60,000 + (8,000 x £10) + £30,000 =
£170,000
Selling price = £170,,000 = £21.25
(e) The contribution per unit = £10
Increase in fixed costs = £8,000
Additional tickets to be sold = £8,000 / £10 = 800 tickets
(f) Selling price = £20 x 0.9 = £18
Sales volume = 8,000 x 1.3 = 10,400 tickets
Sales 187,200
Variable costs (104,000)
Contribution 83,200
Fixed costs (80,000)
Profit 3,200
Profit is less, so this option should not be undertaken.
(g) Sales volume = 8,000+2,000=10,000
Commission = £20 x 0.05 = £1
Sales 200,000
Variable costs (excl. commission) (100,000)
100,000
Commission (10,000)
© Soheila Malekpour, King’s Business School, 2020-21 Page 1 of 4
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