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 Cost 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 Varible cost per unit = $60.00 The total mixed cost equation The total mixed cost equation = y=a+bx y = $26,000 + $60x To solve the equation, total no. of units can be added at 'x' place. Scatter diagram attached. Showing Outliers a) 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.) b) In view of the department’s cost behaviour pattern, which of the two methods appear more appropriate? Explain your answer
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 Cost 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 Varible cost per unit = $60.00 The total mixed cost equation The total mixed cost equation = y=a+bx y = $26,000 + $60x To solve the equation, total no. of units can be added at 'x' place. Scatter diagram attached. Showing Outliers a) 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.) b) In view of the department’s cost behaviour pattern, which of the two methods appear more appropriate? Explain your answer
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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 Cost | 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 |
Varible cost per unit = $60.00
The total mixed cost equation
The total mixed cost equation = y=a+bx
y = $26,000 + $60x
To solve the equation, total no. of units can be added at 'x' place.
Scatter diagram attached. Showing Outliers
a) 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.)
b) In view of the department’s cost behaviour pattern, which of the two methods
appear more appropriate? Explain your answer
Transcribed Image Text:4,50,000
4,00,000
3,50,000
3,00,000
2,50,000
Series 1
2,00,000
-Series 2
Linear (Series 2)
1,50,000
1,00,000
50,000
-50,000
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