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- This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.

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- March 31, 2021 at 7:40 pm #615624
The following data relate to the number of units produced and their corresponding total costs

incurred.

Units produced Total costs incurred

30.000 $230.000

39.000 $276.000

45.000 $302.500

59.000 $365.500

If the production level exceeds 40.000 units, fixed costs increase by 25% while variable cost per

unit decreases by 10%. Using the High – Low method; calculate the total costs if 47.000 units

are produced.

A. $316.366

B. $311.980

C. $311.500

D. $309.460

Can you help me to solve this problemApril 1, 2021 at 8:57 am #615646As I wrote in reply to your other question, please do not simply type out a full question and expect to be provided with a full answer. Ask about whatever it is in the printed answer that you are not clear about.

The easiest way to solve this is to use a bit of elementary algebra.

Suppose that at levels below 40,000, the fixed cost if F and the variable cost is V per unit.

Then at the 30,000 level we get: F + 30,000V = 230,000,

and at the 59,000 level we get: 1.25F + 59,000 x 0.9V = 365,500Solving these 2 equations will give you the values of V and F at levels below 40,000. For 47,000 units, increase F by 25% and reduce V by 10%.

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