[lume]

hi fahmy
you have just missed one point in the question, that the fixed cost changes after 5500 so you should use 6000 and 7500..as high low method is used with constant fixed cost….

[lume]

hi
to use your ‘X’ for fixed cost below 5500
1. 10% x X + X = 38800
2. (10/100)x X + X = 38800
3. [{10/100} + 1] x X = 38800
4. [{10/100} +{1/1}] x X = 38800
in additions of fractions, you need common denominator..the denominator is the bottom one of a fraction..so in 10/100 the denominator is 100 and for 1/1 it is 1…so if you multiply 100 to the numerator of 1/1(numerator is the top one) and denominator the number doesn’t change..so [100×1]/[100×1]…now both fractions have common denominater..100
5. [{10/100} + {100/100}] x X = 38800
6. [ {10 +100}/100] x X = 38800
7. 110/100 x X =38800

i explained it this way because you wanted to know how the 10 /11 came out

[lume]

I am not good at explanations
so i will just do it step by step

first in the task it states that the total fixed cost increases by 10% when the activity increases 5,500
as in the part 2 of the answer the total fixed cost of activity above 5500 is calculated i.e 30800
now this amount is 10% more than the total fixed cost below 5500
so
10% x (total fixed cost below 5500) + (total fixed cost below 5500) = (total fixed cost above 5500)
[(10 + 100) x (total fixed cost below 5500)] / 100 = 30800
[110 x (total fixed cost below 5500)] /100 = 30800
total fixed cost below 5500 = 30800 x (100/110)
= 30800 x (10/11)

sorry for the long explanation,,but as i said i amnot good with explanations

[Author]

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