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

Agnes

How to calculate task 1.1 B fixed and variable overheads for the following productions level ? Any help?

Irrorate

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

Thank you very much.

molly_

How do you get the fixed costs of £181,000?

CornishPixie

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_612

Hi,

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

Thanks
Sophie

dumutroba

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

sophie_612

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!