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Stepped fixed costs

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Stepped fixed costs

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • November 8, 2022 at 1:10 pm #670982
    rarechel
    Member
    • Topics: 1
    • Replies: 0
    • ☆

    Hi, I had a question to stepped fixed costs
    The question is the following data has been collected from Steps Co:
    Unit produced 5000 7500 10000
    Total costs 54500 76500 90000

    Total costs are made up of two elements, a stepped fixed cost that changes when the units exceed 7000 and some variable costs which remain constant

    According to the answers provided for variables cost per unit is 13500/2500 May I know where did the13500 get? Thank you in advance

    November 8, 2022 at 3:59 pm #670990
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 53344
    • ☆☆☆☆☆

    Although usually we take the highest and the lowest, in this case we take the highest and lowest of those with the higher fixed cost (i.e. 7,500 units and 10,000 units, because they are the two where the number of units exceeds 7,000 and so these two both have the same total fixed cost).

    Using just these two gives a variable cost per unit of (90,000 – 76,500) / (10,000 – 7,500).

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