Help with elements of costing

Hello

Can anyone help me understand how to work out this question?

Q: identify the types of cost behaviour described in each statement below. Choose from fixed, variable or semi variable.

At 4000 units the cost is £10000 and at 7500 units the cost is £18760

At 2500 units the cost is £20 per unit and at 12500 units the cost is £4 per unit

At 1200 units the cost is £4100 and at 4800 units the cost is £14900



Thanks for your help! :)

Comments

  • Adele69Adele69 CambridgePosts: 320AAT Student
    first:
    - how much is 1 unit?
    total cost £10000/4000 units = £2.50 per unit
    total cost £18760/7500 units = £2.5013 per unit
    i'm unsure whether to call this purely variable or semi-variable since it has gone up 10 at some point, or if this should be £18750 when it would be variable as total cost goes up in proportion to output but cost per unit remains the same

    second:
    - how much is the total cost?
    2500 units x £20 per unit = £50,000
    12500 units x £4 per unit = £50,000
    clearly this is a fixed cost, as increased output reduces cost per unit but total remains the same figure.

    third
    - how much is 1 unit?
    total cost £4100/1200 units = £3.416 per unit
    total cost £14900/4800 units = £3.10416 per unit
    more obvious semi-variable, possibly result of a bulk purchase discount at some point between the 1200 and 4800 units
  • jbouscjbousc Posts: 27Registered
    Thank you Adele69!! It makes sense now :)
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