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Sometimes fixed costs are only fixed within certain levels of activity and increase in steps as activity increases. This type of cost is known as stepped cost and needs to be disaggregated into fixed and variable elements for decision-making. You have been presented with the cost data for an organisation with the following information relating to its total costs for the year ending December 2020. Shop Total cost Activity levels E80,000 4,000 E100,000 6,000 E120,000 7,500 DUAN- E180,000 9,000 E200,000 11,000 E220,000 13,000 Variable cost per unit is constant within the activity range and there is a stepped cost of 15% in the total fixed costs when the activity level exceeds 8,000 units. Required: a) What is the total cost at an activity level of 8,500 units? 20 Marks b) Now assume that variable cost per unit increases by $1 per unit of output because of wage negotiations with employees. What is the total cost at 8,500 level of activity? 20 Marks c) Using the information in the table and your knowledge of regression analysis, estimate a cost function depicting the relationship between total cost and activity level. Use your model to predict total cost at (i) 12,000 and (ii) 14,000 activity levels. Which of your predictions is more likely to be reliable and why? 60 Marks