Problem 1:

The following machine hours and utility cost information is available:

Month Machine Hours Utility Cost
January 7,260 $2,960
February 8,850 3,410
March 4,800 1,920
April 9,000 3,500
May 11,000 3,900 Outlier
June 4,900 1,860
July 4,600 2,180
August 8,900 3,470
September 5,900 2,480
October 5,500 2,310
Requirements:
a. Using the high-low method, what is the fixed cost per machine hour?
b. Using the high-low method, what is the fixed utility cost?
c. Using the high-low method, what is the cost formula for utility expense?
d. What is the total variable utility cost for November if 5,000 machine hours are projected?

Problem 2:
The management of a hotel is interested in the relationship between room cleaning costs and guest-days in its hotel.
Using regression analysis on room cleaning costs and guest-days collected over 12 months, the relationship was
shown graphically as follows:

Requirements:
a. What is the estimated monthly fixed room cleaning cost?
b. What is the estimated increase in the room cleaning cost for each additional guest-day?
c. What is the cost formula for the room cleaning costs?
d. If the relevant range is from 0 to 2,000 guest-days, how much is the total room cleaning cost for 2,200 guest-
days?

Problem 3:
Belle Company produces and sells rattan baskets. The number of units produced and the corresponding total
production costs for six months, which are representatives for the year, are as follows:
Month Production Costs Units Produced
April P4,000 500
May 8,000 700
June 6,000 900
July 7,500 600
August 8,500 800
September 7,250 550
Requirements:
a. Using the least squares method, what approximately is the variable production cost per unit?
b. Using the least squares method, what approximately is the monthly fixed production cost?’
c. If the high-low points method is used, how are the results (c.1. variable cost per unit and c.2. total fixed
costs) compared with those under the method of least squares?
Theories:
1. Mixed costs are costs that have
a. Variable and fixed costs components.
b. Manufacturing and administrative costs components.
c. Selling and administrative costs components.
d. Direct and indirect costs components.
2. The fixed and variable components of mixed costs may be separated by using any of the following methods,
except
a. High-low method.
b. Scattergraph method.
c. Least squares method.
d. Weighted-average method.
3. The manager of the mixing department of Ali Van Company wants to determine the fixed variable
components of the department's costs. He collected information on total cost and the number of kilos mixed
for the past 12 months. He wants more accurate results, so he is planning to use a sophisticated method for
cost separation. The manager should use
a. High-low method.
b. Regression analysis.
c. Game theory.
d. Queuing theory.
4. The usual formula for the regression (least squares) equation is y = a + bx + e. Considering such equation,
which of the following is incorrect?
a. The dependent variable is x, while the independent variable is y.
b. The y-axis intercept is a.
c. The slope of the line is b.
d. The error term is e.
5. Multiple regression analysis involves the use of
Dependent Variable(s) Independent Variable(s)
a. None One
b. One One
c. One Two or more
d. Two or more One