Twistweave

jewels.p

I have managed Section 1 ok but I am now on Section 2 and stuck on Task 2.2. Can anyone help get me started as to what I need to do on this? (I know I have to work out costs for an output of 1200) but I cant remember what to do?.............Mind blank again!

Thanks

jewels.p

I know that the Depreciation and Premises Costs will be the same and worked out that Direct Costs would be £240,000 (I think) but how do I calculate the Indirect Labour Costs?

Thanks again for any help.

purple19m

Hi there the indirect labour is a semi variable cost that you need to use the high low method to work it out:

High units:1500 Cost 90000
Low units:1000 Cost 65000
Unit Difference 500 Cost difference 25000

25000/500 = 50 variable cost

so now you work out fixed costs, using the high units;

50 (variable) x 1500 units = 75000 variable at 1500 units
cost 90000-75000 variable = 15000 fixed

so answer is 15000 fixed costs plus variable of 1200x50 = 75000

Your direct costs of 240000 are correct!

Hope that made sense for you. I know what it like when your stuck on something!!

jewels.p

Thanks a lot for that. I get so confused sometimes with what I need to do to calculate something...............just hope I master it before the Exam!