6 Cost equations including volume-based discounts Suppliers often offer discounts to encourage the purchase of increased volumes.
Where volume-based discounts are offered a total cost equation can be derived for each volume range.
Illustration 7 – Equation including volume-based discounts
§ Fixed costs $100,000.
§ Variable costs per unit $5 for volumes up to 1,000 units.
§ Volumes above 1,000 units receive 5% discount on all units.
This gives:转自:考试网 - [Examw.Com]
§ y = 100,000 + 5x for x ≦ 1000
§ y = 100,000 + 4.75x for x > 1000
The graphs of these two functions will therefore show a discontinuity at 1,000 units — see below.
Test your understanding 6
You are given the following cost data:
Fixed costs
Variable costs$6 per unit up to 5000 units.中华考试网(www.Examw。com)
10% discount on all units purchased over 5000 units
Derive equations for the total cost function. |