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- This topic has 5 replies, 4 voices, and was last updated 6 years ago by John Moffat.
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- September 24, 2017 at 9:29 am #408468AnonymousInactive
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For the below questions my answer is $2.33 per unit.
The following are the total overhead cost for different levels of output:
COST ($) OUTPUT (units)
9600 2400
15000 4800
24000 7200
22800 9600What is the variable cost per unit (to the nearest $0.01) using the high low technique?
How come it becomes 1.83?
Please advise. Thank you.
September 24, 2017 at 10:09 am #408484I don’t know how you arrived at $2.33.
The highest output is 9,600 units, and the lowest is 2,400 units.
so the variable cost = (22800 – 9600) / (9600 – 2400) = $1.83
I do suggest that you watch my free lectures on this. The lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.
October 13, 2017 at 10:49 am #410761Hi,
can you please help me with this question?
Thank youA company has the following costs at 3 activity levels
Units $
5000 180000
8000 240000
11000 276000The variable cost per unit is constant over this range of activity, but there is a step fixed cost and total fixed costs increase by 20% when the activity level exceeds 7500 units.
Estimate the expected total cost when the activity level is 7000 units.
I have an answer to this question, but I don’t understand the logic.
October 13, 2017 at 6:45 pm #410844Because 8,000 and 11,000 units are both above the level at which fixed costs increase, you first use the high low method on these two.
This gives a variable cost of $12 per unit, and a fixed cost of $144,000.So at 7,000 units, the variable cost will still be $12 per unit.
However the fixed cost above 7,500 units is 20% more than it is below 7,500 units, so is 120% of the fixed cost we need.
So the fixed cost at the lower level is 144,000/120% = 120,000.October 27, 2017 at 12:27 pm #413393Sir can you please tell me if the way is calculate the total cost is right in this situation because it always gives the same answer :
Variable cost = 276000-240000/11000-8000=12
Fixed cost (I usually take the value before the step up)= 180000-(5000*12)=120000Total cost for 7000 units= 120000+(7000*12)=204000
October 27, 2017 at 2:56 pm #413411That is correct.
Why does the fact that it always gives the same answer worry you – there is only one correct answer?
And why do you say you usually take the value before the step-up? Here 7,000 is below the step-up and so you are correct to do so. Had they asked for units above the step-up then you would have had to increase the fixed cost. - AuthorPosts
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