ExpertEasy2 marksShort Answer
ACCA · Question 17 · 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 cost gap 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 cost gap for the AgriScout drone. (Enter your answer as a whole number, without the $ sign)
How to approach this question
Cost Gap = Current Estimated Cost - Target Cost.
Full Answer
Target Cost = $1,200 - ($1,200 * 20%) = $960.
Current Estimated Cost = $1,050.
Cost Gap = $1,050 - $960 = $90.
Common mistakes
Subtracting the target cost from the selling price instead of the estimated cost.
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