Week 4, LO 3 Demo - and derive the cost function using the...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Week 4 Week 4 Skill Building Demonstration Problem 3 Analyze a mixed cost using the high-low method. Learning Objective 3 Process for analyzing mixed cost using high-low method is as follow: 1. Identify the period with the lowest level of activity 2. Identify the period with the highest level of activity. 3. Compute the change in cost as follows: Change in cost = Cost at High Level of Activity - Cost at Low Level of Activity 1. Compute the change in activity as follows: Change in Activity = Cost at High Level of Activity - Cost at Low Level of Activity Estimated Variable Cost = Change in Cost/Change in Activity Forumulas Given the following Information use the high low method to estimate variable cost
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: and derive the cost function using the high level of activity. Required: With this information determine the variable DLHr cost using the High-Low Method. Problem Change in cost = Cost at High Level of Activity - Cost at Low Level of Activity Change in cost = $8, 900 - $7,000 = $1,900 Solution Change in activity = Activity High Level of Activity - Activity at Low Level of Activity Change in activity = 730 - 500 = 230 Variable Cost = $1900/230 = $8.26 DLHr Cost Function Y = b = Mx = TC = FC + VC = $8,900 = FC+ $8.26 (730) $8,900 = FC + $6030 $8900 $6030 = FC $2878 = FC TC = $2878+$8.26(x)...
View Full Document

Page1 / 2

Week 4, LO 3 Demo - and derive the cost function using the...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online