The table below shows monthly data collected on production costs and on the number of units produced over a twelve month period. Month Total Production Costs Level of Activity (Units Produced) July $ 230,000 3,500 August 250,000 3,750 September 260,000 3,800 October 220,000 3,400 November 340,000 5,800 December 330,000 5,500 January 200,000 2,900 February 210,000 3,300 March 240,000 3,600 April 380,000 5,900 May 350,000 5,600 June 290,000 5,000 Required: Determine the variable cost per unit and the fixed cost using the high-low method. What is the equation of the total mixed cost function? Prepare the scatter diagram, clearly showing any outliers Using the line of best-fit, determine the company’s fixed cost per month and the variable cost per unit. (Use 0 & 5,000 units. In view of the department’s cost behaviour pattern, which of the two methods appear more appropriate? Explain your answer. PLEASE ANSWER QUESTION 3,4 &5

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The table below shows monthly data collected on production costs and on the number of units produced over a twelve month period.

Month

Total Production Costs

Level of Activity (Units Produced)

July

$ 230,000

3,500

August

250,000

3,750

September

260,000

3,800

October

220,000

3,400

November

340,000

5,800

December

330,000

5,500

January

200,000

2,900

February

210,000

3,300

March

240,000

3,600

April

380,000

5,900

May

350,000

5,600

June

290,000

5,000

Required:

  1. Determine the variable cost per unit and the fixed cost using the high-low method.
  2. What is the equation of the total mixed cost function?
  3. Prepare the scatter diagram, clearly showing any outliers
  4. Using the line of best-fit, determine the company’s fixed cost per month and the variable cost per unit. (Use 0 & 5,000 units.
  5. In view of the department’s cost behaviour pattern, which of the two methods appear more appropriate? Explain your answer.

PLEASE ANSWER QUESTION 3,4 &5

 
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