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Q.The management accountant of a business has identified the following information:
Activity level 800 units 1200 units
Total cost $16400 $23600
The fixed costs of the business step up by 40% at 900 units.
a) What is VC per unit?
b) what is FC at 1100 units?A. VC per unit:
(23,600-16,400)/(1,200-800)=$18/unitB. FC at 1100 units
$18=1 unit—>900unit=$16,200
==> FC at 900 = 40%*16,200=6,480==> FC at 1100 unit = (6,480*11,00)/900=$7,920
No!!!!
you can still use high low method or equation800 CV + CF = 16 400
1200 CV + 1.4 CF = 23600CV/unit is $ 8
and CF at 1100 unit is $14000CV is constant $8 but the CF does change at 900 at 40% more.
from the equation the CF below 900 units is $ 10 000 and increase at 900 units.
hope I help
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