- 10 Marks
MA – L2 – Q32 – High/low analysis
Calculate variable/fixed costs using high/low analysis for ZAMCO and assess profit impact of a customer's offer.
Question
ZAMCO
(a) Using the high/low method, calculate the variable cost per unit and the monthly fixed costs for ZAMCO.
(b) Calculate the normal sales price per unit and the contribution per unit at this sales price.
(c) A new customer has offered to buy 25,000 units each month from ZAMCO at a price that is 20% below the normal sales price. Accepting this offer would result in a fall in other sales by one-fifth of the units sold to the new customer. Advise whether ZAMCO should accept the new customer’s offer.
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