ExpertEasy2 marksShort Answer
ACCA · Question 16 · Specialist cost and management accounting techniques
Section B - Case 1: AeroDrone Tech
AeroDrone Tech is an agricultural technology startup developing the 'AgriScout', a drone designed to monitor crop health. Market research indicates that large-scale farms would be willing to pay $1,200 for such a drone. AeroDrone's investors require a profit margin of 20% on the selling price. The current estimated production cost of the AgriScout is $1,050.
Calculate the target cost for the AgriScout drone. (Enter your answer as a whole number, without the $ sign)
Section B - Case 1: AeroDrone Tech
AeroDrone Tech is an agricultural technology startup developing the 'AgriScout', a drone designed to monitor crop health. Market research indicates that large-scale farms would be willing to pay $1,200 for such a drone. AeroDrone's investors require a profit margin of 20% on the selling price. The current estimated production cost of the AgriScout is $1,050.
Calculate the target cost for the AgriScout drone. (Enter your answer as a whole number, without the $ sign)
How to approach this question
Target Cost = Expected Selling Price - Desired Profit Margin.
Full Answer
Target Cost = Selling Price - Desired Profit.
Selling Price = $1,200.
Desired Profit = 20% of $1,200 = $240.
Target Cost = $1,200 - $240 = $960.
Common mistakes
Calculating the margin on cost instead of selling price (e.g., dividing by 1.2).
Practice the full ACCA PM — Performance Management Practice Exam 6
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