Osbourne books level 4 management accounting chapter activity 2.4

LaurenF0204

Please help with the energy part

A company has already produced budgets based on its first scenario.

Energy costs is semi variable with a fixed element of £48000.

The alternative scenario is based on an increase only on the variable energy cost of 3%.

First scenario data:
Sales volume 190,000 units
Selling price £11.50
Energy £124,000

Alternative scenario data:
Sales volume 180,500 units
Selling price £11.73


Please explain how I work out the alternative scenario cost for the energy it should be £122,366 but not sure how you get there.

mcchoc

Scenario One - Total Cost £124,000. Less fixed of 48,000 = £76,000. Variable cost per unit = £76,000/190,000 = £0.400 .
Scenario 2 - Apply 3% increase. £0.400 + 3% = £0.412 per unit. X 180,500 units = £74,366 variable total cost.
Add back your fixed cost of £48,000 to get new total of £122,366.