Fixed-Cost-Absorption-by-Volume (1).pptx

Fixed Cost Absorption by Volume

Impact of reducing currency supply on cost per pound.

by Alvar Maldonado

Understanding Fixed Costs and Volume

Fixed Costs

Costs that don't change regardless of volume.

Volume Change

Represented by total available currency in pounds.

Initial Currency Volume

Total Pounds Available

1,956,008

Total Fixed Costs

XX dollars

Changes in Currency Volume

New Amount of Pounds

Reduction in Volume

Percentage Reduction

1,956,008 - 1,519,307 = 436,701 pounds

436,701 / 1,956,008 x 100 ≈ 22.29%

1,519,307

Impact on Fixed Cost Absorption

Old Cost per Pound

X / 1,956,008

New Cost per Pound

X / 1,519,307

Effect of Reduced Volume on Cost per Pound

Old Cost

X / 1,956,008

New Cost

X / 1,519,307

Percentage Increase

(1,956,008 - 1,519,307) / 1,519,307 x 100 ≈ 28.74%

Summary of Findings

Reduction in Volume

Approximately 22.29%

Increase in Cost

Approximately 28.74%

Conclusion

Reducing volume leads to higher cost per pound.