Section C Question: HS Equation

it’s a question 250 but from Kaplan kit. I will take me a few min to type in.

“HS manufactures components for use in computers, The business operates inn highly competitive market. where there are a large number of manufactures of similar components. The Managing Director seeks your advise to determine the selling price that will maximize the profit to be made during this period;
Date given:
MARKET Demand:

The current selling price is $ 1350 and at this price the average weekly demand over lat four weeks has been 8,000 components. An analysis for the market show that for every $50 increase in price demand will falls by 1000 components per week. Equally for every $50 reduction in selling price, the demand will increase by 1,000 components per week.

Cost:
Direct materials is $270. The price is part of a fixed price contract with the material suppliers and the contract does not expire for another year.

Production labour and conversion costs, together with other overheads cost and the corresponding output volumes, have been collected for the last four week and there are a follows:

Week Volume Cost
1 9,400 7,000
2 7,600 5,688
3 8,500 6,334
4 7,300 5,446

No significant changes in cost behavior are expected over next 12 weeks.

REQUIREMENT;
Calc optimum selling price of the component for the period.

My question is how would you calc Variable costs? many hanks Anna

yes, indeed the high low method. The Kaplan answer is confusing though. They answer is:

VC per unit: (7000-5446) x 1000/(9400-7300). And all makes sense, except for multiplying the cost by 1000. where this 1000 came from?

many thanks

o dear, I am being silly, there is headings $000….gosh such annoying mistake when you are in the rash. I am sorry John for wasting you time 🙁