Page 22 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Chapter 1

6.3 Using a target return

This is a way of calculating the profit mark-up:

Profit mark-up = Targeted return on investment in the product /budgeted level of
production

The targeted return on investment is calculated as:

Targeted return on investment in the product = Total investment in the product ×
targeted rate of return

6.4 Using a margin %

If given a margin, the selling price can be determined as follows

Selling price = Total cost ÷ (1 – required margin):

Illustrations and further practice

Now try example 6 from Chapter 1.

18