- This topic has 1 reply, 2 voices, and was last updated 12 years ago by
.
- Posts
An organisation has the following total cost at two activity level:
Activity Level (units) 8000 13000
Total Costs 22000 31000Fixed cost are constant in this range of activity and variable cost per unit decrease by 1.5 per unit when activity exceeds 12000 units.
what is the total cost at an activity level of 16000 units?
I hope this will help.
1. Corrected costs for 13,000 units: $31,000 + 1,000 units * $1.50 = $32,500
2. The difference between $22,000 and $32,500 is the cost of production 5,000 units (13,000-8,000). So $10,500 costs are to produce 5,000 units.
3. Standard variable cost per unit is $2.10 ($10,500/5,000)
4. Fixed costs = $22,000 – 8,000 units * $2.10 = $5,200
5. Total cost to produce 16,000 units = fixed costs + total costs of production 12,000 units * standard cost + 4,000 units * decreased cost:
$5,200 + 12,000 * $2.10 + 4,000 * $(2.10-1.50) = $32,800
- You must be logged in to reply to this topic.