# Mock paper 2 task 4 value of a and b

lyndsey1570
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Hi

Can anybody help me with the above question think I’m being a bit dumb but I don’t even know where to start ! Thought it might be a high low thing ? Any help would be appreciated as I’m going mad!

Can anybody help me with the above question think I’m being a bit dumb but I don’t even know where to start ! Thought it might be a high low thing ? Any help would be appreciated as I’m going mad!

## Comments

524Administrator11Registeredthankyou I did try to amend my question to add it but it didn't let me?

Jet is forecasting energy costs. If 150000 units are manufactured

the energy costs are £55000. If 200000 units are manufactured the energy costs rise to £70000. The costs vary in a linear manner, they can be predicted using y=a+bx.

X = Number of units manufactured

Y= the total energy costs at that level

What is the value of A and B?

105Registered, MAAT, AATQB, AAT Licensed AccountantThe high units will be 200,000 and the low units are 150,000. That's a difference of 50,000 units.

Therefore, £15,000 divided by the 50,000 units gives a result of 0.30 - this is your variable cost per unit which is B.

You then need to find the fixed costs. Simply multiply 0.30 by the number of units and what is left will be the fixed cost. So, for example, 200,000 units x 0.30 = £60,000 but we know that it costs £70,000. Therefore the fixed costs will have to be £10,000 - this is A. You can check the result with the low usage.

11Registered