QUESTION ONE - ANSWER ALL PARTS PARTA Oven Pies Ltd plans to buy a delivery van to distribute pies from the bakery to various neighborhood shops. It will use the van for three years. The expected costs are as follows: New Van Trade-in price after three years Service costs, every 6 months Spare parts, per 10,000 miles Four new tyres, every 15,000 miles Vehicle license and insurance, per year Fuel, per litre *Fuel consumption is 1 litre every five miles 15,000 600 450 360 1,200 800 0.70 REQUIRED: (a) Prepare a table of costs for mileages of 5,000, 10,000, 15,000, 20,000 and 30,000 miles per annum, distinguishing variable costs from foved costs. (b) Calculate the average cost per mile at each of the mileages set out in (a). (c) Write a short commentary on the behaviours of costs as annual mileage increase. (20 Marks) PART B Mateo Company's average cost per unit is 1.425 per unit at the 16,000-unit level of activity and 1.38 at the 20,000 unit level of activity. Assume that all of the activity levels mentioned in this question are within the relevant range. REQUIRED: Predict the following items for Mateo Company (a) (b) (c) Variable cost per unit. Total fixed cost per period. Total expected costs at the 18,000 unit level of activity (20 Marks) PARTC Provide three reasons why an organisation may require knowledge of how costs and revenues vary with different levels of activity. (10 Marks) (TOTAL:50 MARKS) Page 2 of 6