York Plc was formed three years ago by a group of research scientists to market a new medicine that they had developed. The technology involved in the medicine's manufacturing is both complex and expensive. As a result, the company is faced with a high level of fixed costs. The company's chief executive, concerned with this, shows some results in a recent conference with managers. It was indicated that average unit cost fell as production volume increased and this was due to the company's heavy fixed cost base. The CEO showed that as they closed closer to the production of 140,000 packs (maximum capacity), the average cost per unit fell. The data the CEO used are as follows: Production volume (packs 80,000 100,000 120,000 140,000 Average cost per unit £860 £776 £720 £680 Current sale and production volume 130,000 Selling Price per pack £840 The CEO has asked you, as a member of York Plc's management accounting team, to understand how profitability changes with production. You are asked to: a) Calculate the amount of York Plc's fixed costs. (also explain how the variable cost was found)

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To calculate York Plcs fixed costs we can use the highlow method which involves using the data from ... View the full answer