Managment Costing Practice Assessment Task 8 help

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steph0123
steph0123 Registered Posts: 2
in Management Accounting: Costing
Can someone please explain how to work out the cost clarification and the total cost at 6000 miles ?
(Question and answer attached)

I understand Cost Clarification 2 is Variable but I can't seem to work out the others?

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  • dumutroba
    dumutroba Registered Posts: 262
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    Fixed is fixed at £60000
    Stepped fixed is £30000, because between 3000 miles and 5000 miles there is a step. 5000 miles and 8000 miles have same amount and since 6000 miles is between them we can assume 6000 miles is £30000
    For semi variable use High low method by taking the cost at 2000 miles and 8000 miles
    8000-2000 =6000 miles
    92000-32000=£60000
    60000/6000=£10
    2000*10=20000 variable
    32000-20000=12000 fixed
    Variable cost for 6000 miles will be 6000*10=60000
    Fixed cost will be 12000, therefore total cost will be £72000
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