1.1 B question sample assesment 1 Management Accounting: Decisions and Control

AgnesAgnes Posts: 7Registered
How to calculate task 1.1 B fixed and variable overheads for the following productions level ? Any help?




Comments

  • IrrorateIrrorate Posts: 140Registered
    Complete a high-low to get the variable, plug it back in for the fixed then take into account the amendments underneath the table.

    23900u - £324400
    19000u - £295000
    4900u - £29400
    1u - £6 variable
    fixed costs: £181k

    @ 21000u FC £181k VC £126k
    @ 36000u FC £193k (£181k + £12k) VC £205k (25000 @ £6, 11000 @ £5)
    Agnes
  • AgnesAgnes Posts: 7Registered
    Thank you very much.
  • molly_molly_ Posts: 4Registered
    How do you get the fixed costs of £181,000?

  • CornishPixieCornishPixie Posts: 107Registered, MAAT, AATQB, AAT Licensed Accountant
    If each unit has a variable cost of £6 then 23900 units will have variable costs of £143,400 Take this cost away from the full cost for 23900 units (£324,400 - £143,400) will give you £181,000 for the fixed costs. The same works for the 19000 units (19000 x 6 = £114,000). The full cost for 19000 units is £295,000 less the variable costs £114,000 = £181,000.

    Hope that helps.
  • sophie_612sophie_612 LondonPosts: 104Registered
    Hi,

    Please can someone explain this to me i've tried reading the other comments but it just doesn't make sense.

    Thanks
    Sophie
  • dumutrobadumutroba Posts: 265AAT Student, AATQB
    Hi Sophie,

    we have to produce data for 21000 and 36000 units and the condition that is given affects only the 36000 units, so finding the variable and fixed cost for 21000 will be straight forward by using the high low method on the data already given for 19000 and 23900 units, the calculation is as follows:
    23900-19000=4900units
    324400-295000=£29400
    29400/4900 =£6 VARIABLE COST PER UNIT
    Therefore 19000units x £6=£114000 variable cost
    To find fixed cost we will use the formula total cost-variable cost=fixed cost, or 295000-114000=181000 fixed cost
    We will use the same data for the 36000 units, but we will need to take into account the conditions given
    We are told that anything above 30000 units the fixed cost will increase by £12000, therefore for the 36000 units the fixed cost must be 1810006+12000=193000
    For the variable cost anything above 25000 units will cost £1 less, so:
    25000units x £6=150000
    11000 units x £5 =55000
    Total 36000 units £205000
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  • sophie_612sophie_612 LondonPosts: 104Registered
    dumutroba said:

    Hi Sophie,

    we have to produce data for 21000 and 36000 units and the condition that is given affects only the 36000 units, so finding the variable and fixed cost for 21000 will be straight forward by using the high low method on the data already given for 19000 and 23900 units, the calculation is as follows:
    23900-19000=4900units
    324400-295000=£29400
    29400/4900 =£6 VARIABLE COST PER UNIT
    Therefore 19000units x £6=£114000 variable cost
    To find fixed cost we will use the formula total cost-variable cost=fixed cost, or 295000-114000=181000 fixed cost
    We will use the same data for the 36000 units, but we will need to take into account the conditions given
    We are told that anything above 30000 units the fixed cost will increase by £12000, therefore for the 36000 units the fixed cost must be 1810006+12000=193000
    For the variable cost anything above 25000 units will cost £1 less, so:
    25000units x £6=150000
    11000 units x £5 =55000
    Total 36000 units £205000

    Hi @dumutroba so helpful as always thanks so much!
    dumutroba
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