- This topic has 1 reply, 2 voices, and was last updated 8 years ago by
.
- Posts
Activity level (units) 7000 12000
Total costs $238000 $336000
Variable cost per unit is constant within this range of activity levels and there is a step-up in the total fixed costs of $18000 when the activity level exceeds 10000 units.
What is the total cost at an activity level of 9000 units?
A. $270000
B. $277200
C. $288000
D. $306000Grateful if you could help me on the above question. Thank you.
The difference in costs between the highest and lowest is 336000 – 238000 = 98000.
18000 of this is due to the extra fixed costs and so the rest of the difference (98000 – 18000 = 80000) is due to the variable costs of the extra 5000 units.
So the variable cost per unit = 80000/5000 = 16.00Therefore since the fixed costs for 9000 units will be the same as for 7000 units, the total cost of 9000 units will be higher than that for 7000 units by the variable cost of the extra 2000 units.
i.e. 238000 + (2000 x 16.00) = 270000In future, please do not simply set a question and expect an answer. You must have an answer in the same book in which you found the question (assuming you are using a Revision Kit from one of the ACCA approved publishers, which is what you should be using). So ask about whatever it is in the answer that you do not understand.
(Also, I assume you are watching my free lectures :-). The lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.)
- The topic ‘Cost behaviour involving step-up costs.’ is closed to new replies.