7 3 Cost Behavior Analysis 2022
7 3 Cost Behavior Analysis 2022
7 3 Cost Behavior Analysis 2022
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MS 0702 COST
BEHAVIOR
A. JJ Company has provided the following data for the first five months of the year:
Machine Lubrication
Hours Cost
January .. 10 125
February. 20 210
March..... 30 330
April ....... 40 450
May ....... 50 545
1. Using the high-low method of analysis, compute the
estimated variable lubrication cost per machine hour
rounded to the nearest centavo
Cost at Cost at
Highest Lowest Change in
Activity Activity Variable Costs
545 - 125 = 420 10.50 per
50 - 10 40 VARIABLE machine
Highest Lowest Change in COST RATE hour
Activity Activity Machine Hours
Cost at Cost at
Highest Lowest
Activity Activity Variable Costs
545 - 125 = 420 10.50 per
50 - 10 40 VARIABLE machine
Highest Lowest Machine Hours COST RATE hour
Activity Activity
y = a + b x
FORMULA FOR A STRAIGHT LINE
HIGHEST ACTIVITY
y = a + b x FORMULA FOR A STRAIGHT LINE
545 = a + 10.50 50
545 = a + 525.00
545-525 = a
20.00 = a
LOWEST ACTIVITY
y = a + b x FORMULA FOR A STRAIGHT LINE
125 = a + 10.50 10
125 = a + 105.00
125-105 = a
20.00 = a
y = 20.00 + 10.50 x
COST PREDICTING FORMULA
TOTAL = FIXED + VARIABLE X ACTIVITY
COSTS COSTS COSTS
RATE
y = a + b x
WRONG
Highest Low est
Cost - Cost
-
_
x 150/5 30
_
y 1,660/5 332
Driver Effect
Machine Lubrication
Hours _ Costs _
n x x y y xy x²
1 10 30 125 332 1,250 100
2 20 30 210 332 4,200 400
3 30 30 330 332 9,900 900
4 40 30 450 332 18,000 1,600
5 50 30 545 332 27,250 2,500
150 150 1,660 1,660 60,600 5,500
∑x ∑y ∑xy ∑x²
_
x 150/5 30
_
y 1,660/5 332
_ _
∑xy - n (x) (y)
b
_
∑x² - n (x)²
60,600 - 5 30 332
5,500 - 5 30 ²
_
x 150/5 30
_
y 1,660/5 332
_ _
∑xy - n (x) (y)
b
_
∑x² - n (x)²
60,600 - 5 30 332
5,500 - 5 30 ²
60,600 - 5 30 332
5,500 - 5 30 ²
y = - + 10.00 x
COST PREDICTING FORMULA
Driver Effect
Machine Lubrication
Hours _ Costs _
n x x y y xy x²
1 10 30 100 300 1,000 100
2 20 30 200 300 4,000 400
3 30 30 300 300 9,000 900
4 40 30 400 300 16,000 1,600
5 50 30 500 300 25,000 2,500
150 150 1,500 1,500 55,000 5,500
∑x ∑y ∑xy ∑x²
_
x 150/5 30
_
y 1,660/5 300
_ _
∑xy - n (x) (y)
b
_
∑x² - n (x)²
55,000 - 5 x 30 x 300
5,500 - 5 x 30 ²
_ _
a = y - (b) x
a = 300 - 10.00 x 30
a = 300 - 300.00
a = - or -
a 8. RST's average cost per unit is the
same at all levels of volume. Which
of the following is true?
a. RST must have only variable
costs.
b. RST must have only fixed costs.
c. RST must have some fixed costs
and some variable costs.
d. RST's cost structure cannot be
determined from this information.
A. JJ Cute Company has provided the following data for the first five months of the year:
Machine Lubrication
Hours Cost
January .. 10 125
February. 20 210
March ..... 30 330
April ....... 40 450
May ....... 1 10
In the month of May the plant closed due to health quarantine. Repeat requirements 1 to 8 in
problem A.
n x y
1 10 Lowest 125
2 20 210
3 30 330
4 40 Highest 450
5 1 10 OUTLIER
Cost at Cost at
Highest Lowest
Activity Activity Variable Costs
450 - 125 = 325 10.83 per
40 - 10 30 VARIABLE machine
Highest Lowest Machine Hours COST RATE hour
Activity Activity
Driver Effect
Machine Lubrication
Hours _ Costs _
n x x y y xy x²
1 10 25 125 279 1,250 100
2 20 25 210 279 4,200 400
3 30 25 330 279 9,900 900
4 40 25 450 279 18,000 1,600
100 100 1,115 1,115 33,350 3,000
∑x ∑y ∑xy ∑x²
_
x 100/4 25.00
_
y 1115/4 278.75
_ _
∑xy - n (x) (y)
b
_
∑x² - n (x)²
33,350 - 4 25 278.75
3,000 - 4 25 ²
Machine Lubrication
Hours Cost
January .. 10 125
February. 20 210
March ..... 30 330
April ....... 40 450
May ....... 200 2000
In the month of May JJ Cute Company accepted a one-time special order from a foreign buyer
that required overtime work. Repeat requirements 1 to 8 in problem A.
Drive r Effe ct
Ma chine Lubrica tion
Hours Costs
n x y
1 10 125
2 20 Low e st 210
3 30 330
4 40 Highe st 450
5 200 2000 OUTLIER
Cost at Cost at
Highest Lowest
Activity Activity Variable Costs
450 - 125 = 325 10.83 per
40 - 10 30 VARIABLE machine
Highest Lowest Machine Hours COST RATE hour
Activity Activity
Drive r Effe ct
Machine Lubrica tion
Hours _ Costs _
n x x y y xy x²
1 10 25 125 279 1,250 100
2 20 25 210 279 4,200 400
3 30 25 330 279 9,900 900
4 40 25 450 279 18,000 1,600
100 100 1,115 1,115 33,350 3,000
∑x ∑y ∑x y ∑x ²
_
x 100/4 25.00
_
y 1115/4 278.75
_ _
∑x y - n (x ) (y)
b
_
∑x ² - n (x )²
33,350 - 4 25 278.75
3,000 - 4 25 ²
Using the Excel Output forecast the cost for 45 machine hours.
50 545
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.99833237
R Square 0.996667521
Adjusted R Square 0.995556695
Standard Error 11.40175425
Observations 5
ANOVA
df SS MS F Significance F
Regression 1 116640 116640 897.2308 8.17E-05
Residual 3 390 130
Total 4 117030
Coefficients Standard Error t Stat P-value Lower 95% Upper 95%Lower 95.0%
Upper 95.0%
Intercept 8 11.95826074 0.668993608 0.551378 -30.0565 46.05652 -30.0565 46.05652
X Variable 1 10.8 0.360555128 29.9538106 8.17E-05 9.652553 11.94745 9.652553 11.94745
y = a + b X x
8.00 10.80
68%
95%
99.70%
459.79 471.20 482.60 494.00 505.40 516.80 528.21
k-bar=494 = 11.40
a 36. The closeness of the relationship between the cost and
the activity is called
a. correlation.
b. spurious.
c. regression analysis.
d. manufacturing overhead.
Ansel owner enlist your help to develop a CVP relationship for planning and control.
Required:
1. Using the high-low method, compute the variable and fixed component of the cost of sales,
selling and administrative expenses.
2. Prepare a contribution margin income statement based on sales of P100,000.
3. Compute for the peso breakeven point.
Particular November(P) October(P)
Particular November(P)
Breakevenpoint =
13,700/35% 39,142.86
Sales 100%
Variable Cost
Total Variable Cost 65%
Contribution Margin 35%
Total Fixed Costs 13,700
Net Income
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