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Sir
With regards to step cost in high low methodWhen we do questions
Why do we deduct the step cost from theFormula of calculating the variable cost per unit?
Because part if the increase in the total cost is due to the increase in the fixed cost and it is only the remainder of the increase that is an increase in the variable cost due to more units being produced.
Uhmm thank you sir
But still I’m puzzled somewhat ….Yes of course part of the increase is due to the increase in fixed costs
Agree with that sir
But why do we have to deduct it from the numerator of the formula of vc.
Ohh I think I got it now sir
Whenever we do highlow method
Step up costs will not be considered at the time of calculating the variable cost per unitBecause
As Step up cost is an additional fixed cost
We will treat it differently after we calculate the variable cost per unit
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