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Kenya Auto Assemblers Ltd assembles cars from imported knocked-down-kits. The company has been operating at 60% capacity, assembling 3,000 cars per year. The following information relates to...

Kenya Auto Assemblers Ltd assembles cars from imported knocked-down-kits. The company
has been operating at 60% capacity, assembling 3,000 cars per year.
The following information relates to the company‟s operations at two different levels of capacity.

Answers

NB: Total Cost, Y =Fixed cost + Variable Costs.
At 4,000 output level, Y = FC + 4,000 (200,000) But Y = 800,000,000.
Therefore 800,000,000 = FC + 4,000 (200,000) Equation (i)
Similarly at Activity level 3,000 units, Y = FC + 3,000 (200,000) Equation
(ii)Solving Equation (i) and (ii) simultaneously shows that FC = 0.

raphael answered the question on April 16, 2021 at 12:11

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