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Stepped Costs

Abbie28Abbie28 Feels At HomeRegistered Posts: 42
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!

Comments

  • A-VicA-Vic Expertise Guaranteed Registered Posts: 6,970
    do you mean semi varible costs? with fixed and varible costs ?
  • Abbie28Abbie28 Feels At Home Registered Posts: 42
    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 =???????

    :)
  • AuntieTAuntieT Feels At Home Registered Posts: 96
    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!
  • Abbie28Abbie28 Feels At Home Registered Posts: 42
    thats right your a life saver!!! THANKYOU :) i so happy i finally get it haha
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