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ACCA Applied Knowledge · Management Accounting · Spreadsheets

Cell C5 contains units sold (800). Cell C6 contains the selling price per unit ($15). Cell C7 contains variable cost per unit ($9). Fixed costs of $3,200 are in C8. Which formula in C9 gives the profit?

The correct formula is =C5*(C6-C7)-C8. Contribution per unit of $6 multiplied by 800 units gives $4,800, and deducting fixed costs of $3,200 gives a profit of $1,600. The other formulas fail to multiply the unit contribution by volume correctly.

  1. A=C5*(C6-C7)-C8Correct
  2. B=C5*C6-C7-C8
  3. C=(C6-C7)*C8-C5
  4. D=C5*C7-C6*C8

Explanation

Profit = units x (price - variable cost) - fixed costs = 800 x 6 - 3,200 = 4,800 - 3,200 = $1,600. Option B subtracts variable cost per unit only once rather than multiplying by units, giving a wrong value. The others combine the cells illogically.

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