Forums › Other Accountancy Qualifications Forums › High low method fixed stepped cost
- This topic has 7 replies, 2 voices, and was last updated 10 years ago by waseem.
- AuthorPosts
- July 6, 2014 at 8:11 pm #178275
Activity level Total costs
500 4000
1000 6000
1500 10000Fixed cost is stepped up after 1000 units. calculate total cost for:
a:800
b:2000can any 1 please solve this problem
July 6, 2014 at 10:08 pm #178278first, the stepped up fixed cost of 1000 will b deducted from the total cost of 10000, i.e 10000-1000= 9000
now perform your high and low analysis, (9000-4000)/(1500-500)= 5. this is your variable cost per unit.
remember your formula, y=a+bx. Y=total cost, a=fixed cost n b=variable cost.
Now, finding our A, u can use either of d high or low activity level. Lets use the high here,
9000=a+(5*1500). 9000=a+7500, a=9000-7500, a=1500.
now, A=1500 is your fixed cost before step and (1500+1000)= 2500 is your fixed cost after step up.
now determine your total cost of 800 and 2000.
Use this formulas: TC=1500+5(x) for cost below the step up and TC=2500+5(x) for cost above the step up.
For 800, which is below the stepup, we use TC= 1500+(5*800) which will give you a total cost of 5500; while for 2000 which is above the stepup, we use TC= 2500+(5*2000) which will give you a cost of 12500. That is all, i hope this helps.July 7, 2014 at 9:25 am #178321i am thankful to you Haywhai08
July 7, 2014 at 9:29 am #178322could you please define stepped fixed cost why we use this cost in high low method ?
July 7, 2014 at 6:46 pm #178344Haywhai08 your answer is wrong today in class i checked from my class teacher he said this is wrong answer..
July 7, 2014 at 6:52 pm #178345the variable per unit cost is 4 not 5
fixed cost for no 1 is $ 2000
fixed cost for no 2 is $4000
A:800 UNITS: $2000+800*4=$5200
B:2000 UNITS:$4000+2000*$12000
THE CORRECT ANSWER OF THAT PROBLEMS OF STEPPED FIXED COST..July 7, 2014 at 10:57 pm #178363i would like to see his workings, especially how the teacher got his variable cost per unit amd how the effect of the step up was reflected in the calculation.
July 7, 2014 at 11:28 pm #178367Activity level Total costs
1000 6000
1500 8750
2000 10500Fixed cost is stepped up at 1500 units. calculate total cost for 500 units.
please solve
- AuthorPosts
- You must be logged in to reply to this topic.