ExpertEasy2 marksShort Answer
ACCA · Question 04 · Specialist Cost and Management Accounting Techniques
Section A
OmniVision, a tech startup, is developing a new virtual reality (VR) headset. The competitive market price for similar headsets is $450. OmniVision requires a profit margin of 20% on the selling price.
The current estimated cost to manufacture the headset is $385.
What is the target cost gap per unit? (Enter the number only, without the $ sign)
Section A
OmniVision, a tech startup, is developing a new virtual reality (VR) headset. The competitive market price for similar headsets is $450. OmniVision requires a profit margin of 20% on the selling price.
The current estimated cost to manufacture the headset is $385.
What is the target cost gap per unit? (Enter the number only, without the $ sign)
How to approach this question
1. Calculate Target Cost: Selling Price - Required Profit. 2. Calculate Cost Gap: Estimated Cost - Target Cost.
Full Answer
Required profit = 20% of $450 = $90.
Target Cost = Selling Price - Required Profit = $450 - $90 = $360.
Current estimated cost = $385.
Cost Gap = Current Cost - Target Cost = $385 - $360 = $25.
Common mistakes
Calculating the 20% margin on the cost instead of the selling price, or providing the target cost ($360) instead of the gap.
Practice the full ACCA PM — Performance Management Practice Exam 5
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