EXERCISES: COST BEHAVIOR ANALYIS

1. Variable vs Fixed Costs

Adriel Company manufactures and sells a single product. A partially completed schedule of the
Company’s total and per unit costs over a relevant range of 60 to 100 units produced each year is given
below:

(I) 60 units (II) 80 units (III) 100 units

TOTAL COSTS
(A) VARIABLE COSTS P120 P? P?
(B) FIXED COSTS P? P? P600
TOTAL COSTS P? P760 P?
PER UNIT COSTS
(D) VARIABLE COSTS P? P? P?
(E) FIXED COSTS P? P? P?

REQUIRED:
1. Complete the schedule by writing the missing amounts
2. Which two (2) specific costs remain constant over the relevant range?
3. Which two (2) specific costs are directly related with production?
4. Which specific cost is inversely related with production?
5. Express the cost formula based on the line equation form ‘Y = a + bX’
6. If the Company produces 75 units, then how much is the expected total costs?
2. HIGH-LOW METHOD
The controller of SUREDAD Hospital would like to come up with a cost formula that links
emergency department cost to the number of patients admitted during the month. The emergency
department’s costs, and the number of patients admitted during the past nine months follows:

Month Number of Patients Emergency Department’s Cost

April 18 P15,600
May 19 P15,200
June 17 P13,700
July 15 P14,600
August 15 P14,300
September 11 P13,200
October 11 P12,800
November 48 P72,500
December 16 P14,000

REQUIRED: Using the high-low method, determine:

1. The variable cost per unit
2. The annual fixed costs
3. The emergency department’s monthly cost function
4. The department’s estimated cost if 20 patients are expected to be admitted next month

3. LEAST-SQUARES REGRESSION METHOD

Syd Company’s total overhead costs at various levels of activity are presented below:

Month Machine Hours Total Overhead Costs

March 500 P970
April 400 P851
May 600 P1,089
June 700 P1,208

The breakdown of the overhead costs in April at 400 machine-hour level of activity is as follows:

Supplies (Variable) P260

Salaries (Fixed) P300
Utilities (Mixed) P291
Total P851

REQUIRED:
1. How much is the June’s overhead cost of P1,208 consisted of utilities cost?
2. Using high-low method, determine the cost function for utilities cost
3. Using high-low method, determine the cost function for total overhead cost
4. What would be the total overhead costs if operating level is at 200 machine hours?