Management accounts question

1) We bifurcate into Variable Cost & Fixed Cost:

Change in Amount ($)      160000-132000       28000 

---------------------------   =  --------------------- =  ------------ =  1.4 per unit (This is variable Cost)

Change in Quantity             80000-48000         20000

2) We multiply the Number of Gallons (i.e 80,000 X 1.4) = 112,000

3) We deduct the Total Cost for 80,000 Gallons From Step 2 ie. 160,000 Less 112,000 = 48,000 (This is Fixed Cost)

4) Now, we have VC = $ 1.4 per Gallon & Fixed cost at $ 48,000

5) Now, Multiply 75,000 Gallons (Given) by 1.4 (VC) (75,000 X 1.4) = 105,000

6) Add 48,000 (Fixed Cost) (105,000 + 48,000) = $ 153,000

ANS: Total Cost = $ 153,000

Thank you very much Mr. / Mrs. S...

Originally posted by : Anil
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