Don\'t do parts 1 and 2 of es-2(p. 216) In your book-@5-2pd Instead use the comp

Question

Don't do parts 1 and 2 of es-2(p. 216) In your book-@5-2pd Instead use the company's historical data for months 1 to 15 and () find the High-Low equation for this company, and then (il) use the High-Low equation to predict the processing cost for month 20 when the company plans to produce 7,000 units, and also (ili) use the High-Low equation to predict the processing cost for month 21 when the company plans to produce 10,300 units. You need to show CLEAR calculations to support your answers. 2. Su bmit assignment by 11:59 pm. on Friday june 22. Remember, you can only submit your assignment ONLY ONCE.

Explanation / Answer

(I) High Low method: Cost at highest level of activity               56,000.00 Cost at Lowest level of activity               38,000.00 Highest level of activity               12,000.00 Lowest Level of activity                  4,500.00 Variable cost per unit = (56000-38000)/(12000-4500) Variable cost per unit = 18000/7500 Variable cost per unit = $2.40 Fixed Costs= 56000-12000*2.40 Fixed Costs = $27200 Processing cost = Fixed cost + units*variable cost per unit Processing cost= 27200+units*2.40 (II) Processing cost when 7000 units produced: Processing cost= 27200+7000*2.40                                   =27200+16800 Processing cost= $44000 (III) Processing cost when 10300 units produced: Processing cost= 27200+10300*2.40                                   =27200+24720 Processing cost= $51920

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