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The following extract is taken from the sales budget for UHertz Plc: Sales activity 50% 70% Budgeted Production units £188,000 E263,200 What is the production budget for a sales activity level of 85% Select the correct answer from the options below E319,600 E456,500 £287,400 £235,900

Question

The following extract is taken from the sales budget for UHertz Plc:
Sales activity	50% 	70% 
Budgeted Production units	£188,000 E263,200
What is the production budget for a sales activity level of 85% 
Select the correct answer from the options below
E319,600
E456,500
£287,400
£235,900

The following extract is taken from the sales budget for UHertz Plc: Sales activity 50% 70% Budgeted Production units £188,000 E263,200 What is the production budget for a sales activity level of 85% Select the correct answer from the options below E319,600 E456,500 £287,400 £235,900

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LeahProfessional · Tutor for 6 years

Answer

Given the calculations above, the correct answer is \(Y = £ 319, 600\)

Explain

## Step1:<br />We are given that at \(50\%\) sales activity level, budgeted Production units are \(£ 188,000\) and at \(70\%\) sales activity level, budgeted production units are \(£ 263,200\). Here we see that the sales activity level and production units are in a linear relationship, i.e., as the sales activity level increases, the production units also increase linearly. <br /><br />## Step2:<br />To find the production budget for a deal of \(85\%\), wee need to formulate a linear equation using the given pairs of points, and then use the equation to solve for a third. The equation for a straight line is defined as \(Y = MX + C\) where \(M\) is the slope and \(C\) is the constant.<br /><br />### First, calculate the slope (M):<br />### \(M = \frac{\Delta Y}{\Delta X} = \frac{[Y_2 -Y_1]}{[X_2 -X_1]} = \frac{263, 200 - 188, 000}{70 - 50} = \frac{75,200}{20} \)<br /><br />## Step3: <br />Find the \(Y-)intercept or the constant. Possible use the values of \(X_1\) and \(Y_1\) thus leading to the following equation by substituting back in finding C.<br />### Get,<br />### \(C = Y_1 - MX_1 = 188, 000 - 3760*50\)<br /><br />## Step4:<br />Substitute \(C\) and \(M\) back into the equation and find the budget when the sales activity is at \(85\%\). <br />### We get,<br />### \(Y = MX + C \iff Y = (3760*85) + C\)
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