 Menu

ACCA PM: PM NOTES PM LECTURES

PRACTICE QUESTIONS PM FLASHCARDS
REVISION LECTURES PM MOCK EXAM PM FORUMS
ASK THE TUTOR ASK AI (NEW!)

March 2025 ACCA Exams

Comments & Instant poll >>

20% o! ACCA & CIMA Books

OpenTuition recommends the new interactive
BPP books for June 2025 exams.
Get your discount code >>

PM Chapter 8 Questions
Cost Volume Profit
Analysis

Question 5 of 5
Total Points: 0 out of 10

A company has budgeted to sell 100,000 units of

its product at a price of $25 per unit. The
contribution to sales ratio (CS ratio) is 25%, and
the fixed costs are $375,000.

What is the breakeven sales revenue, and

what is the margin of safety?

Breakeven $1,500,000; margin of safety 60%

Breakeven $500,000; margin of safety 1.5%

Breakeven $1,500,000; margin of safety 40%

Breakeven $500,000; margin of safety 80%

PREVIOUS SUBMIT ALL

Comments

ShanmugaMuruga says
November 26, 2024 at 2:39 pm

Sir,
In Ques 1
Target Profit = $60,000
Fixed cost = $21600
So contribution be = 38400
But taking contribution amt = 81600
Kindly Explain

Log in to Reply

John Mo!at says

November 27, 2024 at 8:53 am

Contribution is the profit before fixed costs.

Given that the profit is 60,000 and that is a"er

charging fixed costs of 21,600, the
contribution must be 81,600.

Log in to Reply

oche22 says
July 26, 2024 at 2:25 pm

Hi, in question 4, in product X why was profit

added to fixed cost to get contribution. i though
contribution is selling price less variable.

Log in to Reply

oche22 says
July 26, 2024 at 3:47 pm

Sorry, I forgot about the other variables.

Log in to Reply

AayushxNoLimits says
March 3, 2024 at 11:28 am

Hi sir, u have helped me a lot in my acca journey, i

just wanted to thank u

Log in to Reply

Iniss says
October 15, 2023 at 10:19 am

I got confused with “a multi-product breakeven

chart may be drawn only if the constant sales mix
is assumed”. I thought it can be drawn based on
the sales of the most profitable product first and
downwards which does not really need to be in a
constant mix.

Log in to Reply

John Mo!at says

October 16, 2023 at 9:24 am

The wording is confusing. Although a chart

can be drawn as you describe, strictly it is not
then called a multi-product break even chart.

Log in to Reply

Sandrak23 says
February 3, 2025 at 8:55 am

Hello i had to confirm, is it because the

breakeven points would be varying(not a
unique BEP) if the constant sales mix are
not assumed and so ‘break-even chart’ is
not possible?

Behram says
May 23, 2023 at 8:28 am

Question

To achieve a target profit, we will use

contribution in formula or C/S ratio.

target profit = Fixed cost + target profit /

contribution or c/s ratio?

for both single product and multi product.

Appreciate your feedback.

Log in to Reply

John Mo!at says

May 23, 2023 at 4:24 pm

I don’t know which formula you are referring

to, but it depends on the information given in
the question.

For multi-product CVP it depends on whether

or not the products are to be made in the
same ratio as budgeted.

Have you watched my free lectures on all of

this?

Log in to Reply

kvz911 says
August 23, 2022 at 7:31 am

Great Test questions Sir ! I got 100%. The most

tricky part of the questions are, If we are given
the C/S ratio Like 30% & the variable cost is 28,
the variable cost will always be the remainder of
the % of C/S ratio. In this example the VC should
be 70%. This is how I solved the 2 tricky
questions. But great Test to learn. Thanks ! ????

Log in to Reply

hermela says
March 3, 2022 at 7:11 pm

sorry sir, can you tell me what product sale mix

is?

Log in to Reply

John Mo!at says

March 4, 2022 at 7:34 am

The way the total sales are mixed between

the di!erent products.

Log in to Reply

hermela says
March 2, 2022 at 9:25 am

i dont get the point of number 3 . why we cant do

individual product profit volume chart against
the breakeven sales volume ? we have done on
the lecture the breakeven chart with out sell mix,
which we do ithe graph by using individual
product,

Log in to Reply

John Mo!at says

March 2, 2022 at 5:36 pm

That was a breakeven chart – not a profit

volume chart,

Log in to Reply

hechosen says
January 23, 2022 at 9:01 pm

Hello Sir. my question is related to question

number 4. Why did we remove the 6,000 fixed
OH? Since its fixed, isn’t it supposed to be
accounted for?
And why did we add the 2.88 to the contribution?

Log in to Reply

John Mo!at says

January 24, 2022 at 6:39 am

I assume that you are referring to the last

part of the question (when we are making the
products in order of their CS ratios).

If so, we didn’t subtract 6,000 anywhere. We

subtracted 8,000 fixed overheads to arrive at
the contribution as soon as we made the first
product. We didn’t subtract any more fixed
overheads but just increased the
contribution as we made further products.

We did not add 28,800 to the contribution.

When we made the third product (V) we
added the extra contribution of 33,400 (0.87
per unit). The 28,800 was the extra sales
revenue (6.00 per unit) because the question
also wanted to know the revenue.

Log in to Reply

arishk098 says
December 6, 2021 at 8:26 am

Respected Sir ,

Thank you
I love the way you are teaching and support.

I did not understand point number 1.

What its means by saying (against breakeven sale
volume)?

Log in to Reply

John Mo!at says

December 6, 2021 at 8:35 am

I assume that you are referring to question 3.

All of the first statement does not really make

any sense, which is why it is untrue

Log in to Reply

Adeniba says
October 20, 2021 at 10:34 pm

Sir, my knowledge is that Margin of Safety =

Budgeted sales-BREAKEVEN POINT/Budgeted
sales. Where BREAKEVEN POINT =Total fixed
cost/contribution
Why did you use BREAKEVEN sales revenue(fixed
cost/CSratio) instead of BREAKEVEN POINT?

Log in to Reply

Adeniba says
October 20, 2021 at 10:56 pm

I’m referring to question 5

Log in to Reply

John Mo!at says

October 21, 2021 at 4:32 am

You will get exactly the same answer for

the margin of safety whether you use
units or $’s revenue. Since the question
asked for the breakeven revenue it is
faster to calculate the margin of safety on
the revenue instead of on the units.

adukwaku1 says
September 27, 2021 at 11:26 am

Sir please can you help me with Question 1. i

don’t understand why the variable cost per unit
was divided by the 70% of sales to get the selling
price per unit.

Log in to Reply

John Mo!at says

September 27, 2021 at 5:23 pm

The contribution is 30% of the sales. Given

that the contribution is the sales less the
variable costs, it means that the variable
costs must be 70% of the sales.

Log in to Reply

shram says
April 28, 2020 at 4:33 am

In question 2 , Is there a missing of per unit in

variable cost ?
Otherwise it may then refer to total variable cost.

Log in to Reply

John Mo!at says

April 28, 2020 at 9:19 am

It is per unit (it could not possibly be the total

cost )

Log in to Reply

onel says
February 21, 2019 at 10:04 am

hi sir ,
in question 4, i used a di!erent approach but i
arrived at the same answer. kindly advice if it
right to use this.
1. found total Total variable cost= 8.40 +3.60+
1.44= 13.44
2. contribution for x , which is sales less total
variable cost = 24-13.44 = 10.56
3.found budgeted fixed cost for both x and y =
(2.88×10,000) +(2.4 x 12500) = 58800
4 Fixed cost when producing x only is 58800 –
6000 = 52800
5.if b represents the total number of units that is
needed to be produced inorder to get a target
profit of 144,000
then
(10.56 x b) – 52800 = 144000
10.56b = 144000+ 52800
10.56b= 196800
b = 196800/10.56
b=18636.6 units of x produced

Log in to Reply

John Mo!at says

February 21, 2019 at 4:04 pm

Yes – your approach is fine

Log in to Reply

onel says
February 21, 2019 at 4:45 pm

Thanks soo much.

kweediie says
February 12, 2019 at 8:36 pm

hi john
in question 5.
we see that the solutions says (25 X 100,000)
gives 2,500,000 how possible is that sir

Log in to Reply

John Mo!at says

February 13, 2019 at 8:47 am

But 100,000 x $25 does equal $2,500,000 !!

Log in to Reply

kweediie says
February 13, 2019 at 10:17 am

apologies my error

Leave a Reply
You must be logged in to post a comment.

Copyright © 2025 · Support · Contact · Advertising ·

OpenLicense · About · Sitemap · Comments · Log in