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MCQ help

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › MCQ help

  • This topic has 1 reply, 2 voices, and was last updated 7 months ago by John Moffat.
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    Posts
  • November 29, 2021 at 4:20 pm #642015
    ahmadimam120
    • Topics: 18
    • Replies: 13
    • ☆

    Sir kindly help me how to solve this.

    The management accountant of a business has identified the following information:
    Activity level 800 units 1,200 units
    Total cost $16,400 $23,600
    The fixed costs of the business step up by 40% at 900 units.
    What is the variable cost per unit?
    A $8.00
    B $18.00
    C $19.67
    D $20.00

    November 29, 2021 at 5:50 pm #642033
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49601
    • ☆☆☆☆☆

    The quickest way to solve this is to use a bit of basic algebra.

    Suppose the variable cost per unit is V, and the total fixed cost if below 900 units is F.

    Then for 800 units: 800V + F = 16,400
    And for 1,200 units: 1,200V + 1.4F = 23,600
    (1.4 F is because it is F + 0.4F)

    If you multiply the first equation throughout by 1.4, then you get:
    1,120V + 1.4F = 22,960

    If you subtract each term in this equation from the second equation above, then you get:
    80V + 0 = 640

    Therefore V = 640/80 = $8 per unit.

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