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inventory costing

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › inventory costing

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by John Moffat.
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    Posts
  • October 27, 2015 at 11:54 am #279241
    jaejoong21
    Member
    • Topics: 5
    • Replies: 1
    • ☆

    An organization has the following total costs at three activity levels:
    Activity levels (unit) 12,000 16,000 22,000
    Total costs 105,000 135,000 170,000
    Variable cost per unit is constant within this range of activity, but there is a step up of 10% in total fixed costs when the activity level is exceeding 17,500 units.
    What is the total cost at the activity of 20,000 units?
    a.$163,500
    b.$165,000
    c.$166,500
    d.$176,250

    October 27, 2015 at 2:53 pm #279267
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51532
    • ☆☆☆☆☆

    Please read again my comments on your previous post and do not simply set test questions!

    Using high low on activity levels of 12,000 and 16,000, the variable cost per unit = (135000 – 105000) / (16000 – 12000) = $7.50 per unit.

    Since activity levels of 20,000 and 22,000 both exceed the 17500 level, the total cost for 20,000 units will be 170,000 – (2,000 x 7.50) = $155,000

    (You have either mistyped something in the question, or there is an error in the book you are using)

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