CA Inter P4 · Chapter 1 · Question 6 of 8
The power cost of a factory is semi-variable. At an output of 6,000 units the total power cost was ₹1,38,000 and at 9,500 units it was ₹1,87,000. Using the high and low points method, the fixed component of power cost is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) ₹54,000.00
Explanation
Variable cost per unit = change in cost / change in output = (₹1,87,000 - ₹1,38,000) / (9,500 - 6,000) = ₹49,000 / 3,500 = ₹14. Fixed cost = ₹1,38,000 - (6,000 x ₹14) = ₹1,38,000 - ₹84,000 = ₹54,000. Check at the high level: ₹1,87,000 - (9,500 x ₹14) = ₹54,000.
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