Cost Behaviour Patterns - HELP PLEASE

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
I Have A Question, I'm Pretty Sure Its A HiLo Question...

Could Someone Help Me And Show Me How To Lay It Out?

1) Calculate The Cost Behaviour Relating To Packaging And Overhead Costs.

( April )( Units:600 )( Costs:5580 )
( May )( Units:420 )( Costs:5436 )
( June )( Units:510 )( Costs:5508 )

2) Calculate Costs For 700 Unit Output.

Any Answer ASAP would be great!

Thanks

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Cost Behaviour Patterns - HELP PLEASE

    Can anyone help?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Cost Behaviour Patterns - HELP PLEASE

    Hi Scott.

    Is is a high-low question.

    Let me know what you think the answer is and i'll tell you if i agree.

    Scott.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Cost Behaviour Patterns - HELP PLEASE

    so far for 1) i have....

    5580 / 600 = 9.3
    5436 / 420 = 12.94

    12.94 - 9.3 = 3.642 / 180 = 0.020

    This is where im stuck...
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Cost Behaviour Patterns - HELP PLEASE

    I think you are going off-track.

    Take the highest amount from the lowest amount (5,580-5,436).

    And the highest quantity from the lowest quantity (600-420).

    Scott.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Cost Behaviour Patterns - HELP PLEASE

    144 / 180 = 0.8

    so is that the answer for number 1? i dont even understand the question, i mean what it actually wants you to come to as an answer, is it VC per unit, work the fixed costs per unit/ as a whole?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Cost Behaviour Patterns - HELP PLEASE

    You now have the VC per unit.

    By multiplying the vc by the quantity, you can work out the fixed costs by subtracting the vc from the total.

    Scott.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Cost Behaviour Patterns - HELP PLEASE

    So is the question asking to just divide the fixed cost and VC per unit, the question 2 asks you to find the total cost.

    to do this (700 x 0.8 ) + fixed costs????
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Cost Behaviour Patterns - HELP PLEASE

    Question 1 is asking you the relationship - you have now calculated what the fixed costs and the variable costs are, i.e. they are the same regardless of quantity.

    Question 2 is a matter of calculating the vc and adding to the fc, which you already know.

    Once you get the hang of these, they will seem much simpler :-)

    Scott.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Cost Behaviour Patterns - HELP PLEASE

    So Can you show me the calculation to work oput the FC from these please?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Cost Behaviour Patterns - HELP PLEASE

    600 * 0.80 = £480
    £5,580 - £480 = £5,100

    Likewise:
    420 * 0.80 = £336
    £5,436 - £336 = £5,100

    Therefore fixed costs = £5,100

    Is it becoming clearer?

    Scott.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Cost Behaviour Patterns - HELP PLEASE

    Oh thats great!

    1) Units:600 > VC = 480 FC = 5100
    Units:420 > VC = 336 FC = 5100

    2) Units:700 > VC = 560
    FC = 5100
    Total = 5660

    Is this correct?

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Cost Behaviour Patterns - HELP PLEASE

    Exactly what i made it, Scott :-)

    Practice a couple more - you'll be doing them in your sleep!

    Scott.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Cost Behaviour Patterns - HELP PLEASE

    Hi,

    Units Cost
    High 600 £5580
    Low 420 £5436
    = 180 144

    144/180 = £0.80 variable cost per unit

    600 x £0.80 = £480 total variable cost

    Total cost - Variable cost = Fixed Cost
    £5580 - £480 = £5100 (Fixed Costs)

    £5436 - (420 x £0.80)= £5,100 Check to see if its correct.

    I hope this helps :wink:

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Cost Behaviour Patterns - HELP PLEASE

    Thank You So Much It Helped So Much!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Cost Behaviour Patterns - HELP PLEASE

    No problem.

    That's why i wanted you to have a go - if i just gave you the answer you may not have understood the process.

    Scott.

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