You are given the following information for a company for two successive periods: January February Materials $20,000 $24,000 Labour $10,000 $11,500 Overheads $10,000 $10,000 Output level 20,000 24,000 Estimate the ﬁxed costs and variable costs for each of the three types of cost shown.

Using the high-low method, the figures can be calculated as follows: Difference in costs/Difference in output = Variable cost per unit Materials $4,000/4,000 = $1 Labour $1,500/4,000 = 37.5¢ Overheads $500/4,000 = 12.5¢ At an output level of 20,000 units this implies total variable costs of: Materials (20,000 × $1) $20,000 Labour (20,000 × 37.5¢) $7,500 Overheads (20,000 × 12.5¢) $2,500 The difference between these figures and the total figures for each type of cost will give an estimate of fixed costs, as follows: Materials nil Labour $2,500 Overheads $7,500 These figures could then be used to carry out cost-profit-volume anslysis and to prepare charts, basing the figure for variable costs per unit on an estimated $1.50, and basing the figure for fixed costs on an estimated $10,000.

Question 11.A.2: You are given the following information for a company for tw...

Accounting for Business Students

You are given the following information for a company for two successive periods:

	January	February
Materials	$20,000	$24,000
Labour	$10,000	$11,500
Overheads	$10,000	$10,000
Output level	20,000	24,000

Estimate the ﬁxed costs and variable costs for each of the three types of cost shown.

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Using the high-low method, the figures can be calculated as follows:

Difference in costs/Difference in output = Variable cost per unit
Materials	$4,000/4,000 = $1
Labour	$1,500/4,000 = 37.5¢
Overheads	$500/4,000 = 12.5¢
At an output level of 20,000 units this implies total variable costs of:
Materials (20,000 × $1)	$20,000
Labour (20,000 × 37.5¢)	$7,500
Overheads (20,000 × 12.5¢)	$2,500
The difference between these figures and the total figures for each type of cost will give an estimate of fixed costs, as follows:
Materials	nil
Labour	$2,500
Overheads	$7,500
These figures could then be used to carry out cost-profit-volume anslysis and to prepare charts, basing the figure for variable costs per unit on an estimated $1.50, and basing the figure for fixed costs on an estimated $10,000.