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The management accountant of a business has identified the following information.
Activity level 800 unit 1200 unit
Total cost $ 16400 $23600
Fixed cost of the business set up by 40% at 900 unitWhat is the variable cost per unit?
Sir i dont understand which method to calculate i saw my book but there is very confusing method sir please tell me how to do this question?
You need to use a bit of simple algebra.
If the variable cost per unit is V and the fixed cost is F, then:
at the 800 level:
800V + F = 16400
at the 1200 level:
1200V + 1.4F = 23600
If you multiply everything in the first equation by 1.4, then:
1120V + 1.4F = 22960
If you subtract everything in the equation from everything in the second equation, then:
80V + 0 = 640
Therefore V = 640 / 80 = $8 per unit.
Sir i have little confuse what would if in the same question fixed cost is 1100 unit
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