Question

Sgur Mor obtained the following information in respect of distribution for the last three months: Units Total Cost Month 1 32

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Answer #1

Answer - (A) £126,250

Explanation-

As per the month 1, total cost for 32000 units would be £100000 and after ever unit increase the cost per units is £2.5 per unit like example below

= (£120000-£100000)/(40000-32000) =  £2.5 per unit

So for the Month 4 the distribution cost for 42500 units would be

For first 32000 units = £100000

Next 10500 units = 10500 * £2.5 = £26250

Total cost = £100000 + £26250 = £126250.

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