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Hi sir,
I have done this qn but i am unable to get the correct answer like for the vc i am getting $4800 i dont understand how i have to use the 40% and the 900 units please kindly guide me so i can solve this qn as i am not expecting you to give me full answer just a little guidance..
the qn is:The management accountant of a business has identified the following information:
activity level 800 units 1200 units
Total cost $16400 $23600The fixed costs of the business step up by 40% at 900 units
(1) what is the variable cost per unit
(a) $8.00
. (b) $18.00
. (c) $19.67
. (d) $20.00(2) what is the fixed cost at 1100 units
. (a) $6400
. (b) $7600
. (c) $10000
. (d) $14000Best is to use a bit of simple algebra.
Suppose the variable cost per unit is V, and the fixed cost at below 900 units is F (and so above 900 units is 1.4F)
Then for 800 units:
800V + F = 16400
For 1200 units:
1200V + 1.4F = 23600There are several ways of now solving the equations, the way I find the easiest is to multiply everything in the first equation by 1.4.
This gives:
1120V + 1.4F = 22960If you now subtract each item in this equation from each item in the second equation, you get:
80V + 0 = 640
So V = 640/80 = 8You should not be able to finish it yourself 🙂
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