Feb 2018 Sample Assessment 1 Task 1b

Holliek

hi there, is anyone able to help? I have the question and the answer but can't work out how to get from A to B.
It's the question re: total fixed and variable overheads for 19,000 and 23,900 units and then 21,000 and 36,000.

lyndsey1570

Hello,

This is the high low method, so you do 324400-295000 and 23900-19000, this gives you 29400/4900 so £6 variable cost per unit.

To get the fixed costs for 21000 units you need to take 23900 x £6 = 143400, then total overheads - variable costs (324400-143400) = 181000 this is your fixed costs for 21000.

Then for your fixed costs for 36000 units you simply add £12000 as it states in the question if over 30000 units are produced increase by £12000 (in this case there are 36000units)

To get the variable cost for 21000 units just do 21000 x £6 worked out previously and this will give you £126000.

To get the variable cost for 36000 units you have to do 36000-25000 (as the question states units in excess of 25000) = 11000 units at the reduced rate of £5 vc per unit.
So 25000 @ £6 = 150000
11000 @ £5 = 55000
= 205000 Variable cost for 36000 units.