6/6/2020 COST BEHAVIOR PATTERNS

The ways to calculate and take decisions on the basis of……….

Mixed Cost Example Prepaid

Post paid Fixed Line rent + Call charges

Total Cost Fixed cost + Variable cost Rs. 80,000

There are some methods to find out the fixed and variable cost elements.
There are some approximations which are very close but not 100%.

Month Output Cost

Jan 10,000 25,000
Feb 12,000 27,500
Mar 11,500 26,500
Apr 14,000 32,000
May 13,600 30,200
Jun 9,400 22,600

Question from book At an acivity level (June) of 8,000

Less: Fixed cost
Total Variable cost

1. Scattergraph, Quick & Dirty method or Visual approximation Y = a + bx

Y = total cost
a = Total fixed cost
b = variable cost / unit
x = activity / output

Due to corona virus, the boss has asked to fin

what will the total cost?

Rs. 17,800

2. High-low method High activity level

Low activity level
3. Regression Method

Home work Exercise 2-3, 2-10

to put on LMS in half an hour
Change in cost
Exercise 2-5 High activity level Aug 5,148
Low activity level Oct 1,588
3,560

3,560 / 2282 = $1.56

Y = a + bx
a = Y - bx

a = 5,148 - (1.56 * 2406)

a = 1,395

Y = a + bx
BEHAVIOR PATTERNS

nt + Call charges

So there are 3 methods to find the boss' query

1. Scattergraph, Quick & Dirty method or Visual approximation

2. High-low method
3. Regression

level (June) of 8,000 9,800

-3,400
6,400

= a + bx
TVC / Activity
Rs.6,400 / 8,000
Rs.0.80 / unit

It means
Y = a + bx
Y = 3,400 + 0.80 x

a virus, the boss has asked to find out the totL cost in the coming month with an expected patient admitted number of 18,000,

Change in Change in Activity

Jun 9,800 8,000
Mar 7,400 5,000
2,400 3,000

2,400 / 3,000
Rs.0.80 / unit
 Y = a + bx
a = Y - bx
a = 9,800 - (0.80*8,000)
a = 3,400

Change in Activity
2,406
124
2,282

.56 * 2406)
number of 18,000,