Hello John,
I hope you're doing well.
Please how do you solve for variable cost per unit in this question:
Activity level 800 units 1200 units
Total cost $16,400 $23,600
The fixed costs of the business step up by 40% at 900 units
Also using this same question, how do you solve for Fixed cost at 1100 units?
Thank you
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Quantitative analysis
6y ago#1There is more than one way of getting the answer, but the best is to use a bit of simply algebra.
Suppose the variable cost is V per unit, and the fixed cost (at levels below 900 units) is F.
Then at 800 units:
800V + F = 16,400
and at 1,200 units:
1,200V + 1.4F = 23,600
Multiply everything in the first equation by 1.4:
1,120 + 1.4F = 22,960
Subtract each term in this equation from each term in the second equation above:
80V + 0 = 640
Therefore V = 640/80 = $8 per unit.
You can then find F by putting V = 8 in any of the equations.
At 1,100 units, the fixed cost is 1.4F
Thank you very much.... I understand it better now.
6y ago#3You are welcome :-)
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