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  2. an organization has the following activity
    total cost activity level
    120000 20000
    136000 24000

    variable cost is constant within the activity range but there is a step up increase 4000 in total fixed cost when an activty level of 22500 is reached .. what are total fixed cost at an activty level of 24000 units

    A 40000
    b 44000
    c 60000
    d 64000

    answer please .

    • The Answer is D.
      Workings
      activity level total cost
      High 24,000 136,000
      low 20,000 120,000
      difference 4,000 16,000

      Extra fixed cost (4,000)
      Total variable cost 12,000

      Variable cost per unit 12,000/4000 = 3

      Fixed cost at level 24,000 (which is the highest level)
      = Total cost at that level – variable cost
      = 136,000 – (24,000 x 3)
      = 136,000 – 72,000
      = 64,000

  3. Question 5 says “Up to a given level o? activity in each period the purchase price per unit o? a raw material is constant”i cant see that constant part on that graph?

    • guaranteed 80% of time based pay means that although they are paid on the basis of what they produce, the minimum they can be paid is 80% of what it would be if they were simply paid per hour.

      So…the minimum they can be paid is 80% x 8 hours x $20 = $128

      You have to calculate what they would be paid using piecework. If it comes to more than $128 then they get paid the piecework amount. If it comes to less than $128 they they get the guaranteed $128.

      The full answer is at the back of the course notes.

  8. Two budgets are given below:

    Output(units) 1,000 2,000
    Budgeted cost 2,500 3.500

    The total fixed costs estimated for the 2,000 units budget are 20% higher than the total fixed costs for the 1.000 units budget.

    What is the budgeted variable cost/unit of output?
    plzz someone help me with this question..!!!!!

      • I am getting $0.5…Can you please explain how it is $0.625?
        This is how I worked:
        Units Budgeted Cost
        1000 2500
        2000 3000 (as total fixed cost for 2000 units is 20% higher than that of 1000 units – hence 3500 – (20% of 2500) )
        Using High low method then it comes $0.5

      • Your workings are treating the whole of the $2500 as though it was a fixed cost.

        If v is the variable cost per unit, and if f is the fixed cost per unit, then:

        for 1000 units: 1000v + f = 2500
        for 2000 units: 2000v + 1.2f = 3500

        There are several ways of solving these equations (all obviously giving the same answer!), but here is one way:

        Multiply the first equation throughout by 1.2
        This gives: 1200v + 1.2F = 3000

        The subtract this equation for the equation for 2000 units:

        (2000v – 1200v) + 0 = 3500 – 3000

        so 800v = 500

        v = 500/800 = 0.625

    • @sumi555, The Course Notes are not meant to replace Study Texts. The Course Notes (together with the lectures that go with them) contain everything you need to be able to pass the exam. However they do not claim to cover every single line of the syllabus – for that you need to refer to a Study Text.

  17. what text book are they studying with?i am using the BPP LEARNING MEDIA textbook and although i find the lecturing here is spot on……….some of the examples i cant follow because my text is slightly different

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