Analyzing costs into variable and fixed elements.
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1. Which method of analyzing mixed cost can be used to estimate an equation for the mixed cost?
2. The high-low method is used with which types of costs.
3. Eddy Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product.
Production volume 6,000 units 7,000 units
Direct materials $582,600 $679,700
Direct labor $136,200 $158,900
Manufacturing overhead $691,800 $714,700
The best estimate of the total variable manufacturing cost per unit is:
4. Given the cost formula Y = $12,500 + $5.00X, total cost for an activity level of 4,000 units would be.
5. The following data relate to two levels of activity at an out-patient clinic in a hospital:
Number of patient-visits 4,500 5,750
General overhead $269,750 $289,125
The best estimate of the variable general overhead cost per patient-visit is closest to
6. Use the following to answer questions 15 & 16:
Golden Dragon Restaurant would like to estimate the variable and fixed components of its utilities costs and has compiled the following data for the last five months of operations.
Month Meals served Utilities costs
December 550 $401.00
January 300 $360.00
February 250 $347.50
March 400 $385.50
April 600 $414.00
15. Using the high-low method of analysis, the estimated variable utilities cost per meal served is:
16. Using the high-low method of analysis, the estimated monthly fixed component of utility cost is:
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Solution Summary
The solution provides a detailed guideline on how to separate costs into variable and fixed costs.
Furthermore, the solution also provides guidelines on using the derived high-low equation for prediction.
Education
- B. Sc., University of Nigeria
- M. Sc., London South Bank University
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