Hello
I can't understand what I did wrong here. The difference in Profit between the VC and FCPC = (COGS + URO) under VC - (COGS + URO) under FCPC. After doing all the calculations, the answer gave me -5000 = 35000000/Practical Capacity, which is -7000 units and not 7000 units, and I don't think I changed signs during the process.
Could you maybe help me to find my mistake?
Thank you in advance
Hello Filipa,
So, the profit under VC was lower in 5 000€. This is due to the fact that, under FCPC, some of the MFC are accounted as product costs, and since there were 500 unsold units from production, the profits will be different.
You can derive the difference by looking at the MFC attributed to the 500 unsold units.
MFC/unit = 70 000€ / 8 000 = = 8.75€
5 000€ = 8.75 * (8 000 / Practical Capacity) * 500
Practical Capacity = 7 000
Good study!