Budgeting! Urgent Help please!

dnewton1989

Hello everyone,

I have my budgeting exam coming up on Wednesday and I am having huge trouble with Stepped costs on practice assessment 1 on the 2013 practice papers task 1.6.

It says depreciation is a stepped cost increasing every 10,000 units but I do not have a clue what I am even trying to calculate with this!

Any help would be much appreciated!

Thanks
Danny

LearningAcademy

Hi,

1) In the original draft, depreciation is £8100. And it is given that it increases at every 10000 qty levels. Therefore, depreciation cost per 10000 units has to be £900 (8100/9).

2) Sales volume in the Alternative Scenario is projected at 75600 units (10% less than 84000). Therefore, depreciation cost will be £900 x 8 = £7200.

Trust, this helps.

Thanks

APhiz

@LearningAcademy where did you get 9 from? Thank you

tomdoane

Because it has taken 9 "steps", if the depreciation was £8000 it would of been 8 eight steps, but the £100 requires another step.