# Help - Forecast operating statement

Registered Posts: 165 Dedicated contributor 🦉
Hi all
Please could someone help me, I am battling to understand how to work out other overheads:Variable element on a practice sim

Planned output is 14000 tonnes, selling price £110, I have to draft up the operating statement for this

Predetermined costs at various levels of activity are:-

Tonnes 10000
Direct Labour £89000
D Mat £650000
Fixed costs £155000

Tonnes 8000
DL £71200
DM £520000
Fixed costs £155000

The statement is set out as:-

Sales rev .........
Less Var Costs ....
Other overheads: Var element ....... (this is what i am battling with)
Contribution........
Profit volume......
Fixed element
Fixed costs.........
Operating Profit (Loss)

My mind has gone totally blank and can't see in the books to refer to!!
Any help would be appreciated

• Registered Posts: 2,453 Beyond epic contributor 🧙‍♂️
Hi Jane,

In the question you quoted:
jane wrote: »
Planned output is 14000 tonnes,

Predetermined costs at various levels of activity are:-

Tonnes 10000

Tonnes 8000

70000 / 10000 = 7
56000 / 8000 = 7

So variable overheads per tonne is 7.
You want to produce 14000 tonnes. So 14 times 7 would be the answer you're looking for.
• Registered Posts: 165 Dedicated contributor 🦉
Hi Rinske

Thanks for your reply, and yes i agree with you there, I calculated it as £98000.00

But just below this there is a line

Variable element
and this is what i am getting confused with

on the 10 000 tonnes its gives you other overheads of £48000

on the 8000 tonnes it gives you other overheads of £42000

??? very confused
• Registered Posts: 466 Dedicated contributor 🦉
Hello,

Try to use the high/low technique to work out the variable/fixed elements. If you still can't work it out then post again.
• Registered Posts: 165 Dedicated contributor 🦉
crispy wrote: »
Hello,

Try to use the high/low technique to work out the variable/fixed elements. If you still can't work it out then post again.

Hi Crispy

I Have now calculated it as 60 000.00 using the high/low method

Highest 10000 tonnes £48000 cost
Lowest 8000 tonnes £42000 cost
2000 £6000

The variable cost is therefore £6000/2000 = £3.00 per unit
So on two above the fixed cost is £18000

So on 14000 units x £3 = £42000 plus £18000 = £60 000

Hope this is correct!!! Is this what you would calculate?

Thank you sooo much for jogging my memory

Cheers, hope you have a wonderful xmas
• Registered Posts: 466 Dedicated contributor 🦉
Looks all good to me - glad to be of help
• Registered Posts: 2,453 Beyond epic contributor 🧙‍♂️
Sorry, I misread your question on that. I just thought they meant the variable overheads, not the other bit.

I agree with Crispy, try the high-low method and there are a few threads with clear explanations on them, so if you are confused, have a look here: