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Dear John
I need your help on Quantitative Analysis and Budgeting KAPLAN Question 116The Management account of Business has identified the following information
Activity Level 800 Unit 1200 Unit
Total Cost $16,400.00 $23,600.00
The fixed Cost of business step up by 40% at 900 Units.What is the variable cost per unit?
A . $8
B. $18
C.$19.67
D.$20The easiest was is to use a bit of simple algebra.
Let the variable cost per unit be V and the fixed cost at levels below 900 be F (so the fixed cost at levels about 900 is F + 0.4F = 1.4F).
At the 800 level: 800V + F = 16,400
At the 1200 level: 1200V + 1.4F = 23,600If you multiply the first equation by 1.4:
1,120V + 1.4F = 22,960
If you now subtract the second question from this third equation:
80V + 0 = 640
Therefore V = 640/80 = $8 per unit.
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