A manufacturer has a target profit of $80000 per annum. Last year the business made a profit of $60000 when 10000 units were produced and sold. Contribution was $10 per unit.
In order to achieve the target profit the plan is to increase advertising by $10000 per annum. Variable cost per unit and selling price per unit will remain unchanged.
What will be the total fixed cost if this plan is carried out?

Q: What topic does this question test?

This question tests Decision Making (Cost-Volume-Profit Analysis) in A-Level Accounting (syllabus code 9706). It is worth 1 mark.

Q: Which exam paper is this question from?

This question appeared in the Cambridge A-Level Accounting Oct/Nov 2021 examination, Paper 1 Variant 2 (9706_w21_qp_12.pdf).

Question

A manufacturer has a target profit of $80000 per annum. Last year the business made a profit of $60000 when 10000 units were produced and sold. Contribution was $10 per unit.
In order to achieve the target profit the plan is to increase advertising by $10000 per annum. Variable cost per unit and selling price per unit will remain unchanged.
What will be the total fixed cost if this plan is carried out?

Oracle Prep · Accepted Answer

The correct answer is D: $50000.

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