ExpertMedium2 marksMultiple Choice
ACCA · Question 11 · Cost Accounting Techniques
Section A
HopeFoundation, an NGO, wants to introduce a new community meal program. The local government will grant a fixed funding of $5.00 per meal provided. The NGO requires a 20% 'surplus' margin on the funding received to cover central administrative overheads. The current estimated cost to produce one meal is $4.30. What is the target cost gap per meal?
Section A
HopeFoundation, an NGO, wants to introduce a new community meal program. The local government will grant a fixed funding of $5.00 per meal provided. The NGO requires a 20% 'surplus' margin on the funding received to cover central administrative overheads. The current estimated cost to produce one meal is $4.30. What is the target cost gap per meal?
Answer options:
A.
$0.70
B.
$0.30
C.
$1.00
D.
$0.00
How to approach this question
Calculate the Target Cost: Funding minus Required Margin. Then calculate the Cost Gap: Estimated Cost minus Target Cost.
Full Answer
B.$0.30✓ Correct
Required surplus = 20% of $5.00 = $1.00. Target cost = $5.00 - $1.00 = $4.00. The current estimated cost is $4.30. The target cost gap is $4.30 - $4.00 = $0.30. The NGO needs to find $0.30 of savings per meal.
Common mistakes
Calculating the margin on cost instead of on the funding (selling price), or forgetting to subtract the target cost from the estimated cost.
Practice the full ACCA MA — Management Accounting Practice Exam 3
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