Production overhead (Veriable cost)?

Question

I am doing a mock paper, there is a question about verialbe cost.

The latest forecast of the cost for 2005-2006 is £3600 for 18 employs. This cost will increase by 10% per employees in 06-07 and the total cost will also be affect by da the budgeted number of employees next year.

Note:
Re-apportionment of internal services cost centre cost (secondary apportionment)

• The cost of the maintenance cost centre are re-apportioned to all other cost centers using the step down method
• The stores cost is then re-apportioned using the direct method based on the direct materials cost incurred in the green maintenance and aerating services department only

And in the data summery

Green maintenance £98000
Aerating services £42000
Aerating machine department £23900


Please help me for this question, Many thanks

Answer 1

Interesting data ... pity you failed to actually ASK the Question :-)

Of course guessing the Question is quite a challenge - in fact almost as exciting as trying to calculate answers from partial data ... but that's what Yahoo Answers (and real Business) is all about !

So I'm going to guess your Question is

"What's the Variable Cost per Unit of Production for yr. 2006-7 ?"

So let's start by deciding what's a Variable Cost.

A Variable Cost is one that changes when you change the quantity of goods you are producing.

So one way to decide if something is a Varibale Cost is to ask yourself "If I stopped producing goods, would I still have to pay that cost ?"

Plainly if you are not using machinary you won't pay running costs - HOWEVER there is a question over the 'green maintenance' = this could relate to cost of maintaining equipment at a 'ready to use' level and may have to be paid even if you are not using the machinery (an example is water pumping in Coal Mines = even if you stop producing coal you still have to pump the water out (otherwise, very soon you don't have a Mine anymore :-) )

This suggests green maintenace should be ignored ...

So the way to do it is :-
Add up all the Variable Costs (including wages - assumption being that you don't have to pay the workers if they are not producing goods :-) ) and divide by the Total Units produced...

(as I suggested at the top, you don't include sufficient data to actually calculate the answer ...)