Week 4, LO 3 Demo

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

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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

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

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