High – Low

I Method

Cost Behavior II Least square

Regression

Analysis
Method/ Method
of Least Square
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Mixed Cost
Fixed Cost Component
Variable Cost Component
c
b
C

Massive X
 C

c
,

Where…….
01

Y = a + bx
Cost Equation Y = total cost
a = fixed cost
02 3

b = variable cost
x = cost driver 03

( units, hours, ….)

.
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 01 Scattergraph

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02 High-Low Method
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Methods of Separating Mixed Cost

into Fixed and Variable Components 03 Least Square Regression Method/
Method of Least Square
4

C
b
c
c
b
C
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I
DesignBall team

High – Low Method

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c
b
C
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aa
bb

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 C

Y = a + bx
b = cost of the highest activity level – cost
of lowest activity level / highest activity
7
level – lowest activity level
Variable rate per direct labor hour = 161/
23 hours
= P 7/direct labor hour
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bb

aa
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b. Management anticipates 32 direct labor hours in December. Determine the projected total cost at 32 hrs.
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Y = 397 + 7x
Y = 397 + 7(32)
Y = 621

C
b
c
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Least Square
Regression Method

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C
b
II 10

c
c
b
C
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aa
bb

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Equation 1 -

Equation 2 -
c
b
C

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12
bb

aa
 Equation 1 7,911 = 12a + b426
Equation 2 284,207 = 426a + b15,620

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Multiply both sides by 35.5
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Equation 1 280,840.50 = 426a + b15,123

Equation 2 284,207 = 426a + b15,620
3,366.50 = 0 b497
b = 3,366.50 / 497 14

C b = 6.77
b
c
  

Equation 1 -
Equation 2 -

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Substitute
Equation 1 7,911 = 12a + (6.77)426
7,911 = 12a + 2,884
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12a = 7,911 – 2,884

a = 5,027 / 12
a = 418. 92
 
Y = a + bx
15
Y = 418.92 + 6.77x

C
b
c
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Thank You !

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