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

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- May 26, 2021 at 10:19 am #621808
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.$20May 26, 2021 at 2:55 pm #621824The 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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