Tutorial 3 Answers

Tutorial 3 Answers - ACCT2522 Management Accounting 1...

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1 ACCT2522 Management Accounting 1 Session 1, 2009 Tutorial Week 3 – Cost basics Suggested Solutions Langfield-Smith, Chapter 3, Case 3.52 Q3-8 only Please note that all numbers in the cost functions should be rounded off to 2 dec places. 3 This analysis is based on the costs and activity within the relevant range, that is between 600 and 1200 patients. Variable cost per unit cost of driver = ($11 100 - $8 300)/(1 200 – 600) = $4.67 Total cost at 1 200 patients of cost driver = $ 11 100 Total variable cost at 1 200 patients of cost driver = 1 200 x $4.67 = $5 604 Fixed cost = $5 496 Cost equation based on high-low method: Administrative cost, Y = $5 496 + $4.67X where X denotes the number of patients during the period Note: Due to rounding, students who use different points may get slightly different answers for the fixed cost, but no more than ± 4. If students used $4.66666667, then they would get $5,500 for the fixed cost regardless of the points used. 4 Cost when 800 patients visit the hospital: Total cost = 5 496 + (4.67 x 800) = $9 232 Cost when 300 patients visit the hospital (mathematically correct, but conceptually wrong):
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Tutorial 3 Answers - ACCT2522 Management Accounting 1...

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