04-17-2010, 04:11 PM
2. fixed and variable element...
in any question if we are asked to find fixed and variable portion then 1st look whether any information is given or not as per hour variable cost etc or budgetted production( and per hour fixed cost )..
If not then we use High & Low method...Although i call this method Desi Tareqay Qaar but to solve a questions it bores some worth.
Now, we move further...
80 % =======>>>> 30,624
60% =======>>>> 25,368
Now substract the lowest values from higher ones
20 =======>>>> 5,266
Now divide 5,266 by 20 = 262.8 ( This is your variable element )
FIXED ELEMENT
Variable + Fixed cost = Total
at 60% utilization
60*262.8 + Fixed = 25,368
Fixed = 25,368 - 15,768 = 9,600
same at 80% utilization you will get 9,600 as it is fixed for every level of utilization.
in any question if we are asked to find fixed and variable portion then 1st look whether any information is given or not as per hour variable cost etc or budgetted production( and per hour fixed cost )..
If not then we use High & Low method...Although i call this method Desi Tareqay Qaar but to solve a questions it bores some worth.
Now, we move further...
80 % =======>>>> 30,624
60% =======>>>> 25,368
Now substract the lowest values from higher ones
20 =======>>>> 5,266
Now divide 5,266 by 20 = 262.8 ( This is your variable element )
FIXED ELEMENT
Variable + Fixed cost = Total
at 60% utilization
60*262.8 + Fixed = 25,368
Fixed = 25,368 - 15,768 = 9,600
same at 80% utilization you will get 9,600 as it is fixed for every level of utilization.
