Activity level 800 units 1200 unit
Total cost $16400 $23600
The fixed cost of the business step up by 40 % at 900 units
What is variable cost per unit
A : $8.00
B : $18
c : $19.67
d: $20:00
The correct answer is 8 in kaplan.Sir could you please explain how.Thanks in advance.
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quantitative analysis budgeting
6y ago#1There is more than one way in which you can get the answer, but I find simple algebra to be the easiest.
Suppose the variable cost is V per unit, and the fixed cost is F at the lower activity level.
For 800 units: 800V + F = 16,400
For 1200 units: 1,200V + 1.4F = 23,600
Multiply everything in the first equation by 1.4:
1,120V + 1.4F = 22,960
Subtract each term in this equation from each term in the second equation:
80V + 0 = 640
So V = 640/80 = $8 per unit.
thankyou sir
6y ago#3You are welcome :-)
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