ACTIVITY 2

COST BEHAVOR, COST FUNCTION, and HIGH LOW METHOD

The following are data from Maxene Company:

April May
Sales in units 3, 200 4, 500
Cost:
Cost S P6, 400 P9, 000
Cost T P5, 600 P5, 600
Cost U P7, 100 P7, 100
Cost V P4, 480 P6, 300
Cost W P3, 950 P5, 250
1. Which of the cost classifications best describes Cost T?
2. Which of the cost classifications best describe Cost V?
3. Which of the cost classifications best describe Cost W?

Johnson Corporation is preparing a flexible budget and desires to separate its electricity expense which
is semi-variable and fluctuates with total machine hours, into its fixed and variable components.
Information for the first three months of 2013 is as follows:
Machine hours Electricity Expense
January 3, 500 P31, 500
February 2, 000 P20, 000
March 4, 000 P35, 600

Requirements: Using the least square method,

4. Compute the variable rate per machine hour
5. Compute the fixed portion of Johnson’s electricity expense
6. Compute the total manufacturing cost if actual machine hours is 6, 000

As part of a cost study, the cost accountant of Shinly Corporation has recorded the cost of operations at
seven different levels of materials usage. The records show the following:
Kilos of materials Costs of operation
80 P800
60 P480
20 P320
120 P1, 200
140 P1, 280
40 P480
100 P1, 040

7. Using the high-low points method, the variable cost of operations per kilo of materials used is
8. Using the same high-low points method, the fixed cost of operations is
 9. What is the cost function of the costs of operation?
10. Assuming 150 kilos of material usage is expected to occur next month, how much will be the
estimated operations cost based on the cost function generated from high-low method?
11. Using the least squares method, the average rate of variability per kilo of materials used is
12. Using the least square method, the fixed portion of the cost is
13. Assuming 98 kilos of material usage is expected to occur next month, how much will be the
estimated operations cost based on the cost function generated from least square method?

Johnson Corporation is preparing a flexible budget and desires to separate its electricity expense which
is semi-variable and fluctuates with total machine hours, into its fixed and variable components.
Information for the first three months of 2013 is as follows:
Machine hours Electricity Expense
January 1,520 P36,375
February 1,250 P38,000
March 1,750 P41,750
April 1,600 P42,360
May 2,350 P55,080

Requirements: Using the least square method,

14. Compute the variable rate per machine hour
15. Compute the fixed portion of Johnson’s electricity expense
16. Provide the cost function of the electricity cost
17. Compute the total electricity cost if actual machine hours is 3,300 for the next month

As part of a cost study, the cost accountant of Shinly Corporation has recorded the cost of operations at
seven different levels of materials usage. The records show the following:
Kilos of materials Costs of operation
80 P800
60 P480
20 P320
120 P1, 200
140 P1, 280
40 P480
100 P1, 040

18. Using the least squares method, the average rate of variability per kilo of materials used is
19. Using the least square method, the fixed portion of the cost is
20. Assuming 98 kilos of material usage is expected to occur next month, how much will be the
estimated operations cost based on the cost function generated from least square method?