cost behaviour

5,000 is deducted because the fixed overheads increase by 5000. What other graphs are you having problems with?

thank yuh john. hmm i don't know how to post graph in this forum.. :(

I can't think for the moment of any other graphs you would have to deal with apart from those dealing with costs!

hmm there are few problems showing the graph and listing 4 options related with graph. so, I always fail to make right answer :( simple fixed and variable graphs are not so problematic.

Can you please correct me the below calculation which one is correct and please explain the reason for why ? my calculation : H - 22000 units $170,000 - set up cost $ 5000 = $165,000 L - 16000 units $135,000 6000 units & $$30,000 Working for answer A & B : $155,000 VC : $30000 / 6000 units = $5 per unit FC : 165,000 - (22000 units x $5) = $55000 ( answer A) FC : $135000 - (16000 units x$5) = $55000 (answer B) y=$55,000 + ( 20,000 units x $5 ) = $155,000 Working for answer C : $160,000 y =$55,000 + ( $5x20,000 units) + $5000 = $160,000 I would like to ask which answer should be correct ? to calculate FC whether should always to remember the step up calculation must use the low unit & low cost ? thank you

Answer C is correct because the question asks for the total cost when 22,000 units are produced. It does not ask for the fixed cost separately - that is just part of the workings.

Possible to ask again , total general fixed cost whether always use the low level ? because the question given even use the low or high the FC answer is the same of $55,000 ? can you please explain what does mean the question not ask for the fixed cost separately ? thank you

why the below question the correct answers is not to add back produced unit of 180 units of total cost? (Question Dec 2002) A company has been reviewing its total cost over the last few periods and has established the following: Period 1 2 3 Sales 225 units 150 units 350 units Total cost $2300 $1500 $2800 The company is aware that fixed costs increase by $500 when sales exceed 200 units. What would be the total cost at a sales level of 180 units? A.$2120 B.$1800 c.$1695 D.$1620 ( correct answer given is D ) my working : for VC - H 350 units - L 150 units = 200 units and Cost $2800-$500 = $800 $800/200 units = $4 per unit use low level FC : $1500 - ($4x150units) = $900 180units : $900 +($4x180units) = $1620 thank you

I'm sorry, sir, actually my question is to asked why the correct answer is not to add back $500 set up cost? But wrong to ask: why the below question the correct answers is not to add back produced unit of 180 units of total cost?? Please ignore. Thank you

Your first question: It doesn't matter whether you work from the lower or the higher. The question that Archana typed asked for 'the total cost for 22,000'. It didn't ask just for the fixed cost, it wanted the total cost.

Second question: 500 is not added because the step-up is only when sales exceed 200 units. Here, you are calculating for 180 units so there is no step-up.

thank you for the reply. the first question, there is a step up cost of $5,000 for added because the level of sales 20,000 units sold is over activity 17,500 units ? my second question , there is step up cost of $500 NOT added because the level of sales 180 units sold did not over activity 200 units ?

That is correct.