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dear tutors, can with help me with the questions as follows:
ACTIVITY LEVEL TOTAL COST
800 units $16400
1200 units $23600the fixed cost of the business step up by 40% at 900 units.
(i) what is the variable cost per unit ?
(ii) what is the fixed cost at 1100 units ?This is a Paper MA problem and is not really relevant for Paper PM (even though in theory anything in Paper MA can be asked again in Paper PM).
Regardless, there is no point in simply setting me a test question and expecting me to simply provide you with an answer. You must have an answer in the same book in which you found the question (assuming, of course, that you are using a Revision Kit from one of the ACCA approved publishers, which is vital to passing the exam).
Ask about whatever it is in the answer that you are not clear about and then I will explain.
sir ,i do know how to perform the computation for 3 activity level .but for only 2 , i have no idea hoe to proceed.
please help me with the calculations pleaseeThe high low method only ever uses 2 levels (even if more activity levels are given) and so I fail to understand how you know how to do it when there are 3 levels but not when there are 2 levels!!!
For the question you have posted, you have to use simply algebra.
If the variable cost is V per unit and the fixed cost at the lower level is F,
then for 800 units: 800 V + F = 16,400
and for 1200 units: 1200 V + 1.4F = 23,600You can solve the two equations in several ways, so use whichever way you were taught at school. The way that I find the easiest is as follows:
Multiply every figure in the first equation by 1.4, which gives:
1120 V + 1.4F = 22,960If you then subtract each term from the second equation above, you get:
80V + 0 = 640. Therefore V = 640/80 = 8 per unit.
You should not be able to calculate F using either of the two original questions as being 10,000, and therefore the fixed cost for levels above 900 units is 14,000.
It is then easy to calculate the total cost for 1,100 units.
Again, why are you attempting questions for which you do not have an answer? You should be using a Revision Kit from one of the ACCA approved publishers – they have answers and explanations.
for 1200 units: 1200 V + 1.4F = 23,600
why we need to multiply 1.4 F at 1200 units but not at 800 unit? The step fixed cost at 900 units right?
In order to have the same number of F’s in both equations.
As I wrote in my previous reply, there are various different ways of solving the two equations (obviously all giving the same result) but it is simple algebra that you must have been taught at school, so use whichever way you were taught 🙂
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