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An organisation has the following total costs at three activity levels:
Activity level (units) 8,000 12,000 15,000
Total cost £204,000 £250,000 £274,000
Variable cost per unit is constant within this activity range and there is a step up of 10% in the total fixed costs when
the activity level exceeds 11,000 units.
What is the total cost at an activity level of 10,000 unitsUse high-low with 15,000 and 12,000 units (because both of them are able 11,000 and so both will have the same fixed costs).
That will give you the variable cost per unit (which is the same at all levels).
For activity of 10,000 units, the fixed costs will be lower than what you have calculated because it is below the step-up.
(it will be 100/110 x the fixed cost that you have calculated)
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