aat level 2, fixed costs - variable costs - total costs - unit costs

AliciaMcAliciaMc Just JoinedPosts: 2Registered
My brain has turned off lol and i am needing a little help as i dont have notes on this area of work..

I am doing a practice test online now and came across fixed costs - variable costs - total costs - unit costs question..

The question is: Fixed costs are 48,000 and Variable costs £11 per unit. I know the fixed costs stay at 48,000 but just need a reminder on how to get the Variable cost. I know its going to be a simple working out lol thanks to those who help :001_smile: xx

Comments

  • ademooreademoore Well-Known Posts: 146Registered
    hi lo method

    Hmm, without further information about the question, can i assume you are referring to the hi-lo method?

    For this, you look at one output in units and its total cost, then look at another output with its total costs.
    See the change in both units and total costs.
    Divide the diff in total costs into the diff in units and this gives you the value costs change for each change in 1 unit - your variable cost per unit.
    When you plug this number in againat one of hte output levels you looked at, then take away its total costs for that level of output, you get your fixed costs (ie the part that doesnt change).

    If this is not what you mean, please can you post more about the question!
  • AliciaMcAliciaMc Just Joined Posts: 2Registered
    Yeah sure i did miss out Units oppps.. Basically it has a table with headings sayins:

    Units - 2,000
    Units - 3,000
    Units - 4,000

    Then has along side, fixed costs - variable costs - total costs - unit costs. It states the fixed cost is 48,000 and that variable costs are 11 per unit but i am just forgetful on how to work out the actual variable cost.. The question in general is confusing to be honest lol.
  • NpsNps Experienced Mentor Posts: 782Registered
    Is it asking you to work out the total costs for the differing number of units, using the same fixed costs and the appropriate amount of variable costs? And then to calculate the cost per unit?

    ie.

    2000 units = 48000 + (2000 x 11) = 70000 so 1 unit is 70000/2000= 35
    3000 units = 48000 + (3000 x 11) = 81000 so 1 unit is 81000/3000 = 27
    4000 units = 48000 + (4000 x 11) = 92000 so 1 unit is 92000/4000 = 23

    If not, I'm afraid I don't know. Can you type the question out?
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