Costing - Help please

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
If direct labour for 3700 products was £60,000<BR>and Direct labour for 3760 was £60,282,<BR>what would the cost be for 4000 products?<BR>and how do u get to the figure?<BR><BR>i have taken the cost for 3700 as £16.22 each<BR>so 3760 is 3700 @ 16.22 and 60 @ £4.70<BR><BR>so i have assumed 4000 would be 3700 @ 16.22 and 300 @ 4.70 but i just dont know and dont understand<BR><BR>Can someone please advise me<BR><BR>Thanks

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Costing - Help please

    ShazAAT<BR><BR>Have you got any more info other than that given? <BR><BR>Eddy
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Costing - Help please

    Like What?<BR><BR>I have to identify if the cost is variable, fixed or semi-variable. and the only given figures are £60,000 for 3700 units and £60,282 for 3760 units.<BR>I am then asked to calculate the cost of making 4000 units based on the same behaviour of costs.<BR>I have other cost, ie for the materials, but these are just variable costs, and are £44.55 per unit no matter how many are produced, ie variable.<BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Costing - Help please

    many thanks to 'Angelicpinkbunny' for her brilliant helpful reply:-<BR><BR>the High-Low techinque:-<BR> <BR>First, you need to determine how much of the amount is fixed costs, and how much is variable. In order to establish the variable costs:<BR>1) You need to look at any past values given and pick out the highest and lowest activity levels, or in this case, there are only two, so it's not so bad.<BR>2) You need to do the following equation:<BR> <BR>Total costs at Highest Activity Level - Total costs at Lowest Activity<BR>________________________________________________________<BR>Total units at Highest Activity Level - Total units at Lowest Activity Level<BR> <BR>Therefore, 60,282-60,000<BR> ______________<BR> 3760-3700<BR> <BR>So, the variable cost per unit is £4.70. (which you've already worked out, anyway) <BR> <BR>To find the fixed costs, simply times the £4.70 by however many units you have (£4.70 x 3760 = £17,672 and £4.70 x 3700 = £17,390) and subtract this from your total figures, leaving £42,610 in both cases, so this is your fixed costs.<BR> <BR>So, to find the cost of 4,000 units, it is just £4.70 x 4,000 + £42,610, which is £61,410
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Costing - Help please

    ShazAAT,<BR><BR>Sorry for not being any help to you. Looks like you found someone else who had the finger on the pulse. I have to say that has helped me as well. Once again my apologies.<BR><BR>Regards<BR><BR>Eddy

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