Question

Pinter Products plc collected data relating to its maintenance cost and volume of activity over several quarters and found the​ following:

Lowest quarterly
activity
Volume of activity: 220,000 units
Total maintenance cost: £60,000

Highest quarterly
activity
Volume of activity: 280,000 units
Total maintenance cost: £75,000

What is the variable cost per unit of​ maintenance?
a) £0.25
b) £0.50
c) £0.75
d) £1.00

Answer 1

The variable cost per unit of maintenance for Pinter Products is calculated by taking the change in total maintenance cost between the high and low activity quarters (£15,000) and dividing it by the change in volume of activity (60,000 units), resulting in £0.25 per unit.

Step-by-step explanation:

To calculate the variable cost per unit of maintenance for Pinter Products plc, we'll use the highest and lowest quarters of activity data provided. The change in total maintenance cost associated with the change in volume of activity gives us the total variable cost, which we can then divide by the change in volume to find the variable cost per unit.

Step-by-Step Calculation:

1. Identify the change in total maintenance cost: £75,000 - £60,000 = £15,000.
2. Identify the change in volume of activity: 280,000 units - 220,000 units = 60,000 units.
3. Divide the total variable cost by the change in volume to get the variable cost per unit: £15,000 / 60,000 units = £0.25 per unit.

Therefore, the variable cost per unit of maintenance for Pinter Products is £0.25 which corresponds to option (a).