Page 264 - P1 Integrated Workbook STUDENT 2018
P. 264
Chapter 12
Cost prediction = fixed cost + variable cost per unit × no. of units
For Jayco:
Total cost = $5,000 + $10 × no. of units
Prediction for output of 3,000 units
Total cost = $5,000 + ($10 × 3,000)
= $35,000
Example 2
Re-forecast the predicted costs for Jayco if variable costs are expected
to inflate at 5% per annum and fixed costs are expected to inflate at 2%
per annum.
Solution
We don’t need to re-do the high-low analysis here - we just need to add the
inflation onto the fixed and the variable costs before making the prediction for
next year.
New fixed cost inflated by 2% = $5,000 × 1.02 = $5,100
New variable cost per unit inflated by 5% = $10 × 1.05 = $10.50
Cost prediction = $5,100 + $10.50 × no. of units
Prediction for output of 3,000 units
Total cost = $5,100 + $10.50 × 3,000
= $36,600
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