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Dear Mr. Moffat,
Hope ur well.
Sir, kindly help me with this question.
The following shows the total overhead costs for given levels of a company’s total output.
Cost: ($) 4000, 7000, 10000, 9500. Outputs (units): 1000, 2000, 3000, 4000.
A step up fixed costs of $500 occurs at an output level of 3500 units. What would be the variable overhead cost per unit ( to the nearest $0.01) using the high-low technique?
Normally as i know, that we usually use the closest units which is relevant to the step up output level first to find out the VC per unit, but in this question it was used differently, and i’m having difficultly in understanding it. Is there any easy or simple way of calculating this type of problem?
I’d really appreciate it if you’d help & explain to me the following question mentioned above.
Thx.
Are you certain that you have copied the question correctly (because it does not make sense for the cost at 4,000 units to be lower than the cost at 3,000 units, given that there will be extra variable costs and also the step-up in fixed costs) ?
If you have copied it correctly, then I think that there is an error in your book! Does your book not also have an answer in it?!
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