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Activity level Total cost
8000 units P22, 000
13000 units P31, 000Fixed costs are constant
variable cost per unit decrease by P1.50 per unit when activity exceeds 12000 units.Required:
Calculate TC at activity level of 16000 unitWhy are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers – they have answers together with workings 🙂
The most efficient way would be to use some simple algebra.
However, the question as you have typed it is impossible on the figures that you have typed. It would only be possible if the question said that the variable cost per unit fell by $1.50 per unit for the production in excess of 12,000 units (which is not what it is saying the way that you have typed it).
If it were the case that the variable cost fell by $1.50 just for the units in excess of 12,000, then for 13,000 units the total cost would be 1,000 x $1.50 = $1,500 higher had the unit cost not fallen and so would have been $32,500.
You could then use the normal high low method to find the fixed cost and the variable cost per unit before the decrease. Then it is easy to get the total cost for 16,000 units.
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