Unit 3, Dellera, Shenna G.

, COACCON
Problem 1. Rosanna Di Magiba Ltd
High-Low Method
Total cost at high level of activity – 6,700
Total cost at low level of activity – 5,826
Total units at high level of activity - 42
Total units at low level of activity - 30

Total cost at high activity - total cost at low activity

Total units at high activity - total units at low activity

b= 6,700 – 5,826 = 874 = 72.83 per unit

42-30 12
High Low
6,700 5,826
Less: variable costs
72.83 x 42 (3,059)
72.83 x 30 (2,185)
Fixed Cost 3,641 3,641
y= a + bx y= a + bx
y= 3,641 + 72.83 (75) y= 3,641 + 72.83 (90)
y= 3,641 + 5,462.25 y= 3,641 + 6,554.70
y= 9,103.25 y= 10, 195.70

1. Estimated fixed cost per month – P 3,641

2. Estimate the total costs for the following activity levels in a month
75 units – P 9,103.25
90 units – P 10, 195.70
Month Activity level Total cost
 Units (x) (y) x² x(y)

1 40 6,586 1,600 263,440

2 30 5,826 900 174, 780
3 36 6,282 1,296 226, 152
4 38 6,396 1,444 243, 048
5 42 6,700 1,764 281,400
6 33 6,052 1,089 199,716
n= 6 ∑x= 219 ∑Y= 37, 842 ∑x²= 8,093 ∑XY=1,388,536
Least Square Method

Equation 1 Y= a+ b x
Equation 2 ∑Y = na + b∑x
Equation 3 ∑XY = ∑xa + b ∑x²

Equation 2 37, 842 = 6a + b219 (36.5)

Equation 3. 1,388,536= 219a + b8,093

1,381,233= 219a + 7, 993.50
7,303 = 99.5b
99.5 = 99.5
73.40 per unit = b
37, 842 = 6a + (73.40) (219) y= a + bx y= a + bx
37,842= 6a + 16,074.60 y= 3,627.90 + 73.40 (75) y= 3627.90 + 73.40 (90)
37, 842 – 16,074.60 = 6a y= 3627.90 + 5,505 y= 3,627.90 + 6,606
21, 767.4 = 6 a y= 9,132.90 or 9,133 y= 10,233.90 or 10, 234
6 6
3,627.90 = a fixed cost
1. Estimated fixed cost per month – P 3,627.90
2. Estimate the total costs for the following activity levels in a month
75 units – P 9,132.90 or 9,133
90 units – P 10, 233.90 or 10,234

Problem 2. Meng Company

Total cost at high level of activity – 15,840
Total cost at low level of activity – 10,720
Total units at high level of activity – 2,190
Total units at low level of activity – 1,230

Total cost at high activity - total cost at low activity

Total units at high activity - total units at low activity

b= 15,840 - 10,720 = 5,120 = P 5.33 variable rate

2,190 – 1,230 960
High Low
15,840 10,720
Less: variable costs
5.33 x 2190 (11,680)
5.33 x 1230 (6,560)
Fixed Cost 4,160 4,160

1. Estimated variable rate  - P 5.33          

2.  Annual Fixed Costs – P 4,160 x 12 months= P 49, 920

Problem 3. Belle Company

Months                   Units Produced (x)      Production Costs (y) xy x²
April                           500                          P4,000 2,000,000 250,000
May                             700                            8,000 5,600,000 490,000
June                             900                            6,000 5,400,000 810,000
July                              600                            7,500 4,500,000 360,000
August                         800                            8,500 6,800,000 640,000
September                    550                           7,250 3,987,500 302,500
n=6 ∑x= 4,050 ∑y= 41,250 xy= 28,287,500 ∑ x²= 2,852,500

Equation 1 Y= a+ b x
Equation 2 ∑Y = na + b∑x
Equation 3 ∑XY = ∑xa + b ∑x²

Equation 2 - 41,250 = 6a + b4,050 (675)

Equation 3 - 28,287,500= 4,050a + b2,852,500
27, 843,750= 4,050a + 2,733,750
443, 750 = 0 + 118, 750b
118, 750 = 0 + 118,750b
3.74 per unit = b
41,250= 6a + (3.74) (4,050)
41,250= 6a + 15,147
41,250 – 15,147= 6a
26,103 = 6a
6 6
4,350.50 = a fixed cost

1. Variable cost per unit - P 3.74

2. Monthly Fixed Cost per unit (Fixed Cost / number of units produced)

April – 4,350.50 / 500 = P 8.70

May - 4,350.50 / 700 = P 6.22

June – 4,350.50 / 900 = P 4.83

July – 4,350.50 / 600 = P 7.25

August – 4,350.50 / 800 = P 5.44

September – 4,350.50 / 550= P 7.91

3. Cost Function - y= 4,350.50 + 3.74 x

Problem 4. Johnson Corporation

Total cost at high level of activity – 35,600

Total cost at low level of activity – 20,000
Total units at high level of activity – 4,000
Total units at low level of activity – 2,000

Total cost at high activity - total cost at low activity

Total units at high activity - total units at low activity

Variable rate per machine hour = 35,000 -20,000

4,000-2,000
= 15,600
2,000
Variable rate per machine hour = P 7.80

High Low
 35,600 20,000
Less: variable costs
7.80 x 4,000 (31,200)
7.80 x 2,000 (15,600)
Fixed Cost 4,400 4,400

y= a + bx
y= 4,400 + 7.80 (4,500)
y= 4,400 + 35,100
y= 39, 500

1. Compute the variable rate per machine hour. – P 7.80

2. Compute the fixed portion of Johnson’s electricity expense. – P 4,400
3. Compute the total manufacturing costs if Johnson’s actual machine hours are 4,500.- P39,500
y= a + bx
y= 4,400 + 7.80 (4,500)
y= 4,400 + 35,100
y= 39,500