AAT Level 4 Budgeting - Stepped Cost

Lewisadams1995

Hi,

Just pulling my hair out with this question if anyone doesn't mind helping:

I need to create an Alternative Scenario from my First Draft.

First draft figures:
Sales volume - 84,000
Sales Revenue - 504,000
Depreciation - 8,100

Alternative Scenario
Sales volume - 75,600
Sales Revenue - 476,280
Depreciation - 7200

Depreciation is a stepped cost, increasing at every 10,000 units.

How did they reach the depreciation figure of 7,200 ????

Thanks alot

Lewis

stevef

In the first draft, sales volume is 84,000 units, so will step up at 90,000 units, or 9 lumps of 10,000 units. Depreciation for each lump of 10,000 is £8,100 divided by 9, that is £900 per step.

In the alternative scenario the sales volume is 75,600, that is up to 8 lumps of 10,000. So depreciation is 8 times £900 equals £7,200.

Lewisadams1995

Thank you very much for your help

enm1976

So glad you asked this question I too was struggling to figure out how they got 7200!! Easy when you know how!