Mendez Hospital showed the following major hospital costs at various levels of activity for CY 2020: Month Hospital Admission Major Hospital Cost(P) February 1,300 P850,000.00 March 8,500 P1,350,000.00 April 1,600 P1,150,000.00 May 1,400 P950,000.00 June 1,200 P800,000.00 July 200 P50,000.00 August 1,650 P1,200,000.00 September 1,550 P1,050,000.00 The breakdown of the major hospital costs in the month of May at 1,400 hospital admission is as follows: Accommodation Expense (Variable) P400,000.00 Utilities (Fixed) P300,000.00 Medicine (Mixed) P250,000.00 Total Overhead Cost P950,000.00 Determine how much of major hospital cost for the month of August of P1,200,000.00 consisted of medicine cost Using high-low method, determine the cost function for Medicine Using high-low method, determine the cost function for major hospital cost
Mendez Hospital showed the following major hospital costs at various levels of activity for CY 2020:
|
Month |
Hospital Admission |
Major Hospital Cost(P) |
|
February |
1,300 |
P850,000.00 |
|
March |
8,500 |
P1,350,000.00 |
|
April |
1,600 |
P1,150,000.00 |
|
May |
1,400 |
P950,000.00 |
|
June |
1,200 |
P800,000.00 |
|
July |
200 |
P50,000.00 |
|
August |
1,650 |
P1,200,000.00 |
|
September |
1,550 |
P1,050,000.00 |
The breakdown of the major hospital costs in the month of May at 1,400 hospital admission is as follows:
|
Accommodation Expense (Variable) |
P400,000.00 |
|
Utilities (Fixed) |
P300,000.00 |
|
Medicine (Mixed) |
P250,000.00 |
|
Total Overhead Cost |
P950,000.00 |
- Determine how much of major hospital cost for the month of August of P1,200,000.00 consisted of medicine cost
- Using high-low method, determine the cost function for Medicine
- Using high-low method, determine the cost function for major hospital cost
High-low method is used by the firm when it has mixed costs as a part of total costs. It helps in determining the amount of variable and fixed costs. It considers costs of highest activity and lowest activity and highest and lowest units. The difference of highest and lowest cost is divided by difference of highest and lowest units to ascertain variable cost per unit. Further, fixed cost is ascertained.
(1): Medicine cost in the month of August:
|
Total Cost (A) |
P1,200,000 |
|
Variable cost (P400,000/1,400) |
P285.71 |
|
Variable cost for the month of August (P285.71*1,650) (B) |
P471,422 |
|
Fixed Cost (C) |
P300,000 |
|
|
|
|
Medicine cost (A-B-C) |
P428,578 |
Learn your way
Includes step-by-step video
Step by step
Solved in 4 steps with 2 images
