ACCA Applied Knowledge · Management Accounting · Cost classification
Brindle Ltd has a relevant range of 10,000 to 20,000 units. At 10,000 units, total fixed costs are $60,000 and total variable costs are $80,000. Which of the following is correct at an output of 16,000 units, within the relevant range?
Fixed cost per unit is $3.75 and total variable cost is $128,000. Total fixed cost remains $60,000 within the relevant range, spread over 16,000 units, while variable cost of $8 per unit rises in proportion with output.
- AFixed cost per unit $6.00; total variable cost $128,000
- BFixed cost per unit $3.75; total variable cost $128,000Correct
- CFixed cost per unit $3.75; total variable cost $80,000
- DFixed cost per unit $6.00; total variable cost $80,000
Explanation
Total fixed cost stays at $60,000, so fixed cost per unit = 60,000/16,000 = $3.75. Variable cost per unit = 80,000/10,000 = $8, so total variable cost = 16,000 x 8 = $128,000. The $6.00 options use the unit fixed cost at 10,000 units, which falls as output rises.
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