Ch-5 Cost Behaviour

Chapter:Cost Behaviour
Problem no. 01: Neptune Rentals offers a boat rental service. Consider the following cost of the company over the relevant range of 5,000 hours of operating time for its boats. Hours Total cost: Variable cost Fixed cost Total cost Cost per unit Variable cost Fixed cost Total cost per unit Hours of Operating Time 5000 6000 20000 168000 188000 ? ? ? ? ? ? ? ? ? 7000 ? ? ? ? ? ? 8000 ? ? ? ? ? ?
Requirement: Compute the missing amounts, assuming that cost behavior patterns remain unchanged within the relevant range of 5000 to8000 hours.
Problem no. 02: Parker Company manufactures and sells a single product. A partially completed schedule of the companys total and per unit cost over a relevant range of 60000 to 100000 units produced and sold each year is given below: Units produced and sold 60000 80000 Total cost: Variable cost Fixed cost Total cost Cost per unit Variable cost Fixed cost Total cost per unit 150000 360000 510000 ? ? ? ? ? ? ? ? ? 100000 ? ? ? ? ? ?
Required: 1 Complete the schedule of the companys total and unit costs above. 2 Assume that the company produces and sells 90,000 units during a year. The selling price is tk7.50 per unit. Prepare an income statement in the contribution format for the year.
Problem no. 03: Harries company manufactures and sells a single product. A partially completed schedule of the companys total and per unit costs over the relevant range of 30,000 to 50,000 units produced and sold annually is given below. 30000 Total costs: Variable cost Fixed cost Total cost Cost per unit Variable cost Fixed cost Total cost per unit 180000 300000 480000 ? ? ? Unites produced and sold 40000 ? ? ? ? ? ? 50000 ? ? ? ? ? ?
Required: 1. Complete the schedule of the companys total and unit costs above. 2. Assume that the company product and sells 45,000 units during a year at a selling price of TK 16 per unit. Prepare an income statement in the contribution format for the year.
Problem no. 04: The administrator of Azalea Hills hospitals would you like a cost formula linking the costs involved in admitting patients to the number of patients admitted during a month. The admitting department costs and the number of patients admitted during the immediately preceding 8 months are given in the table on following pages: Month May Jun July August September October November December Number of patients Admitted 1800 1900 1700 1600 1500 1300 1100 1500 Admitting Departmental Costs 14700 15200 13700 14000 14300 13100 12800 14600
Requirements: 1. Use the high low method to establish the fixed and variable components if admitting costs. 2. Express the fixed and variable components of admitting in the linear equation from y=a+bx. 03. Prepare a scatter graph, using the data given above, plot cost on the vertical axis and activity on the horizontal axis. Fit a straight line to your plotted points using a ruler. Problem No. 05:
The Lakeshore Hotels Guest days of occupancy and custodial supplies expenses over the last seven months were: Months March April May Jun July august September Guest Days of Occupancy 4,000 6500 8000 10500 12000 9000 7500 Custodial Supplies Expenses 7500 8250 10500 12000 13500 10750 9750
Guests days in a measure of the overall activity at the hotel. For examples a guest who stays at the hotel for three days is counted as three guest days. Required: 1. Use the high low method, estimate cost formula for custodial supplies expense. 2. Using the cost formula you derive above, what amount of custodial supplies expenses. Would you expect to be incurred at an occupancy level of 11000 guest days? 03. Prepare a scatter graph, using the data given above, plot cost on the vertical axis and activity on the horizontal axis. Fit a straight line to your plotted points using a ruler. Problem no. 06: Zabel Company a wholesaler of large custom built air conditioning units for commercial buildings, has noticed considerable fluctuation in its shipping expense from month to month as shown below: Months January February March April May Jun July Required: 1. 2. Using the high low method, estimate the cost formula for custodial supplies expense. The president has no confidence in the high low method and would you like to checkout your results using the scatter graph method. Do the following: Units shipped 1 7 5 2 3 6 8 Total shipping expenses 2200 3100 2600 1500 2200 3000 3600
03. Prepare a scatter graph, using the data given above, plot cost on the vertical axis and activity on the horizontal axis. Fit a straight line to your plotted points using a ruler. Problem no. 07: The number of X-rays taken and x-ray costs over the last nine month in Beverly Hospital are given below:
Month January February March April May Jun July August September Required: 1. 2.
X-rays taken 6,250 7,000 5,000 4,250 4,500 3,000 3,750 5,500 5,750
X-ray costs 28,000 29,000 23,000 20,000 22,000 17,000 18,000 24,000 26,000
Using the high low method, estimate the cost formula for x-ray costs. Using the cost formula you derive above, what x-ray costs would you accept to incur during a month in which 4600 x-rays are taken? 03. Prepare a scatter graph, using the data given above, plot cost on the vertical axis and activity on the horizontal axis. Fit a straight line to your plotted points using a ruler.
Roushan Ara Sultana,

Assistant Professor & Co-coordinator of EMBA Program Faculty of Business Administration, USTC. Email: [email protected]

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Chapter:Cost Behaviour

Roushan Ara Sultana,

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