ASSIGNMENT NO 01

O.no.01

The manager of a hotel would like to develop a cost model to predict the future costs of running the
hotel. Unfortunately, the only available data is the level of activity (number of guests) in a given month
and the total costs incurred in each month. Being a new hire at the company, the manager assigns you
the task of anticipating the costs that would be incurred in the following month (September). He
anticipates that the number of guests in September will be 3,000. Given the dataset below, develop a
cost model and predict the costs that will be incurred in September.

Q.No.02
Electrical costs at one of R Company's factories are listed below:

Machine-Hours Electrical Cost

March 413 $7,371
April 506 $7,740
May 435 $7,447
June 486 $7,660
July 499 $7,704
August 461 $7,563
September 467 $7,571
October 458 $7,522
November 425 $7,403
Required: Using the high-low method, the estimate of the fixed and variable components of electrical
costs.
Q.No.03
The next 2 questions refer to the following information.

Ajax uses the high-low method of estimating costs. Ajax had total costs of $50,000 at its lowest level of
activity, when 5,000 units were sold. When, at its highest level of activity, sales equaled 12,000 units,
total costs were $78,000.

1. Ajax would estimate variable cost per unit as

a) $10.00

b) $6.50

c) $4.00

d) $7.53

2. Ajax would estimate fixed costs as

a) $28,000

b) $30,000

c) $64,000

d) $128,000

3. F Company, which uses the high-low method, reported total costs of $24 per unit at its lowest activity
level, when production equaled 10,000 units. When production doubled, at its highest activity level, the
total cost per unit dropped to $15. Foster would estimate variable cost per unit as

a) $9

b) $6

c) Negative $9

d) Negative $0.0009

4. J Company uses the high-low method of estimating costs. Ajax had total costs of $50,000 at its lowest
level of activity, when 5,000 units were sold. When, at its highest level of activity, sales equaled 12,000
units, total costs were $78,000. What would Ajax estimate its total cost to be if sales equaled
8,000units?

a) $32,000

b) $52,000

c) $62,000

d) $80,000
Q.no.04

The table below depicts the activity for a Zen cake bakers for each of the 12 months of a given
year.

Month Cakes Baked (units) Total Cost ($)

January 115 $5,000

February 80 $4,250

March 90 $4,650

April 95 $4,600

May 75 $3,675

June 100 $5,000

July 85 $4,400

August 70 $3,750

September 115 $5,100

October 125 $5,550

November 110 $5,100

December 120 $5,700

Required:

Calculate the high low method for this costing.

Q.no.05
Hussain Transport Company operates a fleet of trucks in Michigan. The company has found that if a
delivery truck is driven for 52,500 miles in a month, its average operating cost comes to 45.6 cents per
mile. If the same truck is driven for only 35,000 miles in a month, its average operating cost increases to
53.6 cents per mile.

Required:

Calculate the estimated variable and fixed cost components of the monthly cost of operating a truck by
applying the high-low point method.
If the truck were driven for 40,000 miles during a month, what total cost would be incurred?

Q.no.06
ZHENG Manufacturing had the following data for the period just ended:

Work in process, Dec. $25,00

31 0

Finished goods, Jan. $60,00

1 0

Finished goods, Dec. $40,00

31 0

$120,0
Direct materials used
00

$220,0
Direct labor
00

$68,00
Administration
0

$800,0
Sales
00

Administrative $44,00
expense 0

Other factory $93,00

overhead 0

$19,00
Indirect materials
0

$33,00
Indirect labor
0

Work in process, $10,00

January 1 0
Required:

Calculate ZHENG's COGM and cost of goods sold (COGS).

Q.no.07
Pirkl Corporation has provided the following data for the month of March:

Inventories Beginning Ending

Raw materials $24,000 $39,000
Work in process $13,000 $20,000
Finished goods $46,000 $35,000

Additional Information:

Raw materials purchases $78,000

Direct labor cost $84,000
Manufacturing overhead cost incurred $43,000
Indirect materials included in manufacturing overhead cost incurred $6,400
Manufacturing overhead cost applied to work in process $44,600

Prepare a Schedule of Cost of Goods Manufactured and a Schedule of Cost of

Goods Sold.

Q.no.08

John Manufacturing Company, a manufacturer of soda bottles, had the following

inventory balances at the beginning and end of 2018:

In 2018, the company purchased $1,000,000 of raw materials, and direct labor incurred a
cost of $1,600,000. Manufacturing overheads were as follows:
Sales revenue was $4,105,000 for the year. Selling and administrative expenses for the
year amounted to $110,000.

Required

 Prepare a cost of goods manufactured statement

 Prepare a cost of goods sold statement

Q.no.09

Assume that as an investor, you are planning to enter the construction industry as a panel
formwork supplier. The potential number of forthcoming projects, you forecasted that within
two years, your fixed cost for producing formworks is Rs. 300,000. The variable unit cost for
making one panel is Rs. 15. The sale price for each panel will be Rs. 25. If you charge Rs. 25 for
each panel, how many panels you need to sell in total, in order to start making money?

Q.no.10

A store sells t-shirts. The average selling price is Rs. 15 and the average variable cost (cost price)
is Rs. 9. Thus, every time the store sells a shirt it has Rs. 6 remaining after it pays the
manufacturer. This Rs. 6 is referred to as the unit contribution.

(a) Suppose the fixed costs of operating the store (its operating expenses) are Rs. 100,000
per year. Find Break-even in units?
(b) If the owner desired a profit of Rs. 25,000, what will be break-even point in Rupees?
(c) If fixed costs rose to Rs. 110,000, break-even in units volume would be?
(d) If the average selling price rose to Rs.16, break even volume would fall?