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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › December 2008 q 4
Q4 part B
I understood the high low method.
But i didnt understand the fixed cost
for example for year 1 the anawer of fixed cost is 80000
Its based on which volume in question its 8000 units so its less than 10000 units and we should use total cost of 130000 to calculate fixed cost or what ?
The fixed cost when production was either 10,000 or 14,000 was $80,000.
The budgeted production in years 1 and 3 is less that 15,000 and so the fixed cost in those two years will be $80,000.
The budgeted production in year 2 is more than 15,000 and so the fixed cost in that year will be 50% higher at 120,000.