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units 16000 22000
total costs 135000 170000the variable cost per unit is constant within this range of activity but there is a step up of 10% in the total fixed costs when the activity exceeds 17500 units.
what is the total cost at an activity of 20000 units.
please solve this question.
Also, if variable cost is not constant then what do we do, Thank you.For me, the easiest way to solve it is to use some simple algebra.
The the variable cost is V per unit and the fixed cost if F, then:
at the 16,000 unit level, 16000 V + F = 135000
at the 22000 unit level, 22000V + F x(1.1) = 170000Multiply the first equation by 1.1, subtract one equation from the other, and you will have a value for V.
You should then find it easy to answer the question 🙂(Surely anyway you have an answer in the same book in which you found the question? 🙂 )
Thank you sir, Actually the question is not from any book its actually from the test (cost classification) but i just changed value to percentage to understand how it works. Extremely sorry by asking again but i am very bad in algebra and always prefer any alternative method.
For this particular question I cannot think of an alternative method.
It is fairly simple algebra (and I am afraid that Paper MA does expect you to be able to do algebra to this level).
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