Osbourne books level 4 management accounting chapter activity 2.4
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LaurenF0204
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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.
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.
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Comments
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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 £122,366.0
