Registered Posts: 136 Dedicated contributor 🌟 🐵 🌟
Hi,

can anyone remind me how to do this question, trying to prepare for 1st resit of this extremity hard exam and I've got mind block and cannot remember.

Thanks
Sophie

• Registered, MAAT, AATQB, AAT Licensed Accountant Posts: 117 Dedicated contributor 🌟 🐵 🌟
Ok, so we are looking at using the hi-lo method here.

We have to produce data for 21,000 and 36,000 units. Only the fixed overhead increase will be affected by the 36,000 units, so finding the variable and fixed cost for 21,000 is straight forward

23,900-19,000=4,900units
324,400-295,000=£29,400
29,400/4,900 =£6 VARIABLE COST PER UNIT

Therefore 19,000 units x £6 = £114,000 variable cost.

To find fixed cost we will use the formula total cost-variable cost = fixed cost, or 295,000-114,000=181,000 fixed cost
Use the same data for the 36,000 units, but you will need to take account of the condition that the fixed portion of overheads increased by £12,000 when more than 30,000 units are produced. Thus, for the 36,000 units the fixed cost must be 181,000 + 12,000 = 193,000.

For the variable cost anything above 25000 units will cost £1 less, so:
25,000 units x £6 = £150,000
11,000 units x £5 = £55,000
Total 36,000 units = £205,000

Hope that helps.
• Registered Posts: 136 Dedicated contributor 🌟 🐵 🌟
thank you @CornishPixie such a massive help
• Registered, MAAT, AATQB, AAT Licensed Accountant Posts: 117 Dedicated contributor 🌟 🐵 🌟
No problem. I took 2 goes at this exam so know how difficult it is.
• Registered Posts: 136 Dedicated contributor 🌟 🐵 🌟

No problem. I took 2 goes at this exam so know how difficult it is.

@CornishPixie it really is so hard on my first attempt i only got 50% and i felt so disheartened i felt like it was completely different to the practise exams and the revision i had been doing did you change anything for the 2nd attempt?
• Registered, MAAT, AATQB, AAT Licensed Accountant Posts: 117 Dedicated contributor 🌟 🐵 🌟
I sourced additional texts (BPP and Kaplan) so that I had different types of questions to tackle just to exercise my knowledge a bit more and give me an idea of how questions can be asked in very different ways/formats.. In the end, I got 70% on my 2nd attempt and took that without hesitation. Learn to love your variances - do as much revision as you can on it. Practice your key 'doing' words in questions - should be on AAT site - as quite often students don't answer the question set. I think that was part of my problem the first time around.
• Registered, AAT Student Posts: 8
Try First Intuition for revision, it is great and soooo helpful!!!!