Level 3 Cost Classification - semi variable



Hi,
I'm heading for another resit! So I'm losing my mind right now in trying to figure this out. I've tried almost everything and I can't find any examples on youtube or anything else so can some one please help me out?

I've muddled through figuring out the rest based on the information given but I'm definitely going to have to use the high-low method on the semi variable, right?? But whatever answer I come up with, is not the answer it should be.

Can someone please help me refresh my thoughts and pop a calculation below?

Many thanks!

Comments

  • EM12345
    EM12345 Registered Posts: 12
    Hi. I recently sat this exam and this type of question came up. You do need to use the high-low method to calculate the cost:

    The lowest cost is 2000 miles at £16 per mile = £32000 total cost
    The highest cost is 8000 miles at £11.50 per mile = £92000 total cost.

    You then need to look at the differences between the highest and lowest:
    H- 8000
    L-2000
    Difference is 6000

    H- £92000
    L- £32000
    Difference is £60000

    To calculate the variabe cost per mile divide 60000/6000=£10 variable cost per mile

    You then need to work out the fixed cost element:
    2000milesx£10=£20000. The fixed cost must be £12000 (£32000-£20000)
    This will also work for 8000 miles:
    8000x£10= £80000. Plus fixed cost of £12000= £92000
    Now you know the variable cost (£10) and the fixed cost (£12000) you can work out the cost for 6000miles:
    6000x£10= £60000 plus £12000= £72000
    Sorry for the lengthy answer. I hope that helps.
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