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

- This topic has 1 reply, 2 voices, and was last updated 2 years ago by John Moffat.

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- November 29, 2021 at 4:20 pm #642015
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 $20.00November 29, 2021 at 5:50 pm #642033The 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 = 22,960If you subtract each term in this equation from the second equation above, then you get:

80V + 0 = 640Therefore V = 640/80 = $8 per unit.

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