Stuck on a Kaplan mock cost and revenues question ?

topcat

Hi all

i have attached mock test 1 answer/question to 2.1 of kaplan online as a pdf .

I can not see how they get Q14 and Q15 of question 2.1 i have tried the HI/LOW method with no success in getting the answers they have..

Q5 and Q6 don't make a great deal of sense either question states up to 4000 not including ..

if anyone would mind helping me out i would appreciate it please:001_smile:

Nps

They go up by 50% when production goes over 4000, so for 5000 units, the fixed costs are 1.5 times the fixed costs for 3000 and 4000 units.

Nps

So as per the above post, questions 5 & 6 are the same as the fixed costs for 3000 units.

MarieNoelle

Hi topcat,
it says the fixed costs are fixed up to 4000 units so the fixed costs stay the same for Q5 and Q6.
Above 4000 units it increases by 50% so £1200 x (1+50%)=£1800 (Q14) and £2000 x (1 +50%) = £3000 (Q15)
There is no need to use the high low method as these are not semi variable costs.
I hope this helps,
MN

topcat

thank you both how do you get the 1.5 times greater i am sure there is a formula for percentage change but can not think of it ?

Nps

It is 50% higher, so half again. 1200/100 x 150, or on a calculator, you can type 1200 x 150%

Just divide any figure by 100 to get 1%, then multiply by whatever % you need.

Jo Clark

1.5 - .5 being 50%

The question scenario says 'the existing fixed costs are fixed with a production of up to 4000 units. If output exceeds 4000 units, these fixed costs will then increase by 50%'.

Therefore take the fixed cost and multiply by 1.5 - this being 100% (the original fixed cost) and 50% of the original fixed cost.

Does this help?

topcat

Kept reading all your replies last night but would didn't make sense.

Looked at in this morning all makes perfect sense

Thank you all very much for your help i am very grateful, really don't know what i would do without you all