TASK 1,STEPPED FIXED COST
Mannaesi
Registered Posts: 80
Hello good people..........can you help me with this question especially with the stepcost
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Comments

The stepped cost is the third cost, as somewhere between 8,000 and 10,000 units, there is a step up.
Perhaps at 5,000 and 8,000 units two machines are used at a rate of £6,000 hire cost (So £12,000), but between 8,000 and 10,000 units, a third machine is hired. Three machines at £6,000 each would equal £18,000.
You are required to state the cost at 7,000 units, so that is within the 5,000 to 8,000 unit range, where two machines are hired.
Hence the required answer at 7,000 units is £12,000 (Still within 2 machine hire capacity.)
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The step up (somewhere between 8,000 and 10,000 units) is an increase of £6,000.
The reason I wrote 2 machines is £12,000 / £6,000 = 2 Machines.
£18,000 / £6,000 = 3 machines.
The probable capacity for each machine is 4,000 units. (In most AAT questions, you would be advised of this.)
1 machine has a capacity of 4,000 units, and each machine hire costs £6,000
So between 1 and 4,000 units the costs would be £6,000.
Between 4,001 and 8,000 units the costs would be £12,000.
Between 8,001 and 12,000 units the cost would be £18,000.
Continuing
Between 12,001 and 16,000 units the cost would be £24,000.
I hope that helps further.0
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