Stepped Costs

Question 1

When calculating stepped costs what formula do you use if you know the cost per every number of units produced

that Example supervision £2000 for every 12 000 units produced and first estimate there were 20000 units

Answer 1

20000 units
/
12000 units
=
1.666
Always round up steps
= 2

Therefore 2 * 2000 required

Question 2

Using the above example what would you do based on increasing the number of units to 28000

Answer 2

Once 24000 units exceeded we would need another supervisor is required making it 3 supervisors being required

3 * 2000

Question 3

Using the above example what happens if the numbers produced are 32000

Answer 3

Next step point would be 36 000 so 32000 falls within 36000 so 3 supervisors would be okay

Question 4

Equipment Hire is based on £350 for every 5000 units Budget 37000

Answer 4

37000
/
5000
=
7.4
Rounded to 8
8 * 350
= 2800

Question 5

Depreciation is a stepped cos of 9500 units

Budget £76400 for 75000 units

Answer 5

75000
/
9500
=
7.89 units
Rounded to 8

£76400/8=9550 per unit

Question 6

Using above example what would it cost if we reduced the number of units to 66000

Answer 6

66000/9500
=6.94
Rounded to 7

7*
9550
=66850