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I get confused that 2 types variable cost from 2 approaches
The first approach that we can calculate from “sales revenues”, if we have “variable revenue”, we will find “fixed revenue”
The second is that we can calculate from ” total cost”, if we have “variable cost”, we will find “fixed cost”I’ve thought “variable revenue” = variable cost + profit but i’m still very confused
Could you address the term “variable revenue” for me, please?Sorry, but I really don’t know what you are asking. If you have found a question that mentions variable revenue then type out the question.
An organisation has the following total costs at three activity levels:
Activity level (units) 8,000 12,000 15,000
Total cost $204,000 $250,000 $274,000
Variable cost per unit is constant within this activity range and there is a step up of 10% in
the total fixed costs when the activity level exceeds 11,000 units.
What is the total cost at an activity level of 10,000 units?The following production and total cost information relates to a single product organisation
for the last three months:
Month Production
units
Total cost
$
1 1,200 66,600
2 900 58,200
3 1,400 68,200
The variable cost per unit is constant up to a production level of 2,000 units per month but
a step up of $6,000 in the monthly total fixed cost occurs when production reaches 1,100
units per month.
What is the total cost for a month when 1,000 units are produced?First Question answer -)
As per the methord , In case where high/low methord is used with stepped fixed cost or changes in the variable cost, we keep following things in mind.
1) Choose two activity levels where the fixed costs remain unchanged.(In stepped fixed cost)
Or
Choose two activity levels where the variable costs remain unchanged.(In changing variable cost)
2) Adjustment may need to be made fixed costs when calculating total cost for a new level activity.Solution -At 12,000 and 15,000 units the fixed cost remain same.
Now we will use the variable per unit formula.
V. C per unit = 274,000-250,000/15,000-12,000 = 24,000/3,000 = usd 8 per unit.Now we have variable cost per unit.
We will put it at the 8000 activity level.204,000= (8*8000) + (Fixed cost)
204,000-64,000= fixed cost
140,000= fixed cost ( the fixed cost at 8000 units)Now, total cost at 10,000 units.
Total cost = 10,000*8 + 140,000
Total cost = 80,000 + 140,000
Total cost = usd 220,000 .Bro there question are very easy. There can’t be more than three types of these questions. Stepped fixed cost, changing variable cost and the simple one
Second question is simple, no adjustments are required as if you will read question carefully you will find there is 3 months data are given. And if we find per month units, none exceed 1100 units per months.
So the solution is –V. C per unit = 10,000/500= usd 20
68200= 1400*20 + fixed cost
Fixed cost = 40,200Total cost at 1000 units.
Total cost = 40,200 + 20* 1000
Total cost = 60,200lokeshdh00: Thank you for your answer, however please do not answer in this forum. It is the Ask the Tutor Forum and you are not the tutor.
But please do help people in the other Paper MA forum 🙂
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