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Hello Tutor, please help me with these questions.
1. The following data relates to a company’s overhead costTime Output Overhead cost Price Index
3 years ago 2000 units $8800 132
current year 5000 units $31000 164Using the High/low technique what is the variable cost per unit expressed in current year prices
2. two investments are available.Investment in P offers interest of 5% per year compounded half yearly for a period of 4 years.Investment Q offers 1 interest payment of 18% @ the end of its 4 year life
What is the annual effective interest rate offered by each of the 2 investmentsThank you in advance.
Q1: You need to restate the cost 3 years ago in current year prices.
So the ‘low’ one three years ago becomes 2000 units at a cost of $8800 x 164/132 = $10,933
Now you can use the high/low method in the normal way.Q2:
P: 5% per year is 2.5% every six months.
So the effective rate is 1.025^2 – 1 = 0.050625 or 5.0625%Q: if the annual rate is R, then (1+R)^4 = 1.18
So (1+R) = fourth root of 1.18 = 1.0422
So R = 0.0422 or 4.22%Wow! so far yet so near, thanks a lot.My last question is:
A van delivered wood to two firms in a week. The following details are availableFirm Weight of wood delivered Distance covered
P 200 kg 250 km
Q 500 kg 800 kmThe van cost $675 000 to operate for the week. Each delivery was carried out separately & there were no other deliveries during the week
What is the cost per kg /kilometre of wood delivered in the week?
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