1) Rationales for costing

Question 1

High - low method

(to separate semi-variable costs into their fixed and variable elements)

Answer 1

1) Calculate variable cost per unit: = Increase in cost / Increase in activity

2) Total semi-variable cost = Fixed cost + Variable cost per unit x Number of units

Question 2

When valuing inventory for financial statements which costing method is better? (Marginal or Absorption)

Answer 2

Absorption costing