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Q:The following table details the total cost Y ,a stepped -fixed cost,for different production levels of product X.
Units of product X , Cost($000)
0 , 100
10 , 100
20 , 100
30 , 150
40 , 150
What could have been the cause of the increase in the cost?
A) Increase storage requirements
B)Pay increase for direct labour
C)Loss of material discounts
D) Increased fuel and maintenance costs for delivery .
After looking at the cost patterns i cannot figure how A is the right answer?
Someone here please explain.B Would increase but would depend on volume as direct labour is variable. Here no difference between output of 30 and 40.
C As B above. Material is also variable.
D Variable, depending on volume sold.
A Yes – suddenly you have to rent an additional warehouse once volume is over 20
@Gromit said:
B Would increase but would depend on volume as direct labour is variable. Here no difference between output of 30 and 40.C As B above. Material is also variable.
D Variable, depending on volume sold.
A Yes – suddenly you have to rent an additional warehouse once volume is over 20
Thanks Sir! All clear
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