Stepped Costs

Abbie28

In general i cant work out the new flexed step cost on a operating staement .... plz could anyone explain how to get the answer for a flexed budget? when it comes to practices i seriously get stuck!

A-Vic

do you mean semi varible costs? with fixed and varible costs ?

Abbie28

in the bpp its stepped

it says in the book as notes the budget for the equipment hire is stepped, increasing at every 8000 units of monthly production.

budget = 63000units equipment = £32000
Actual = 68000 units equip cost = £35000
Flexed = 68000 units equip cost =???????

AuntieT

I think..

For every 8000 units you incur a cost.
Budget set at 63000 units which divided by 8000 = 7.8.

You round up to next whole means you have 8. Think of it as if it were a teacher, in this case you need 8 teachers.

Therefore £32000 divided by 8 = £4000, ie for every chunk of 8000 units you pay £4000.

So when you flex budget to 68000 units you need another chunk of cost so at 68000 units your costs should be £36000.

So in this case you've actually saved money

Think that's right!

Abbie28

thats right your a life saver!!! THANKYOU i so happy i finally get it haha