Calculating stepped costs

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:08AM in AAT student discussion
Hi...Could someone explain to me how to do this calculation. I understand the stepped cost concept but am finding it a bit tricky to work out how to actually calculate the stepped cost based on amended data.<BR><BR>Budget drums produced 80000<BR>Actual drums produced 125000<BR><BR>stepped costs - budget 160000 for 80000 drums<BR>stepped costs - actual 258000 for 125000 drums<BR><BR>Each supervisor can supervise the production of 10000 drums.<BR><BR>Now then, the answer for the flexed budget is £260000 and I cannot understand the calculation. I arrived at £250000 based on 160000/80000 x 125000 units produced. Can anyone help me please on this one? This is something I got wrong on the exam in December and I still can't see what to do! I know its easy but I just can't seem to establish how to do the calculation! Thanks.<BR>

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Calculating stepped costs

    <BR>If one supervisor can supervise 10,000 drums, then for 125,000 you will need 13 supervisors. (125/10 = 12.5 but obviously cannot employ half a supervisor!)<BR><BR>So if 80,000 drums cost £160,000 then a supervisor must be paid £20,000<BR><BR>£20,000 x 13 supervisors = £260,000
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Calculating stepped costs

    Thanks for your help. I feel kinda dense now. LOL.

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