Topics: 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 #otal cost: $ariable cost %i&ed cost #otal cost Cost per unit $ariable cost %i&ed cost #otal cost per unit
Hours of Operating Time 5000 000
!000
"000
'0000 ("000 (""000
) ) )
) ) )
) ) )
) ) )
) ) )
) ) )
) ) )
Requirement: Compute the missing amounts, assuming that cost behavior patterns remain unchanged within the relevant range of 5000 to"000 hours.
Problem no. 0: *ar+er Company manufactures and sells a single product. partially completed schedule of the company-s total and per unit cost over a relevant range of 0000 to (00000 units produced and sold each year is given below: !nits pro"uce" an" sol" 0000 "0000
#otal cost: $ariable cost %i&ed cost #otal cost Cost per unit $ariable cost %i&ed cost #otal cost per unit
(00000
(50000 0000 5(0000
) ) )
) ) )
) ) )
) ) )
) ) )
Require": ( Complete the schedule of the company-s total and unit costs above. ' ssume that the company produces and sells /0,000 units during a year. #he selling price is t+!.50 per unit. *repare an income statement in the contribution format for the year.
Problem no. 0#: Harries company manufactures and sells a single product. partially completed schedule of the company-s total and per unit costs over the relevant range of 0,000 to 50,000 units produced and sold annually is given below.
#otal costs: $ariable cost %i&ed cost #otal cost Cost per unit $ariable cost %i&ed cost #otal cost per unit
0000
nites produced and sold 10000
50000
("0000 00000 1"0000
) ) )
) ) )
) ) )
) ) )
) ) )
Require": (. Complete the schedule of the company-s total and unit costs above. '. ssume that the company product and sells 15,000 units during a year at a selling price of #2 ( per unit. *repare an income statement in the contribution format for the year.
Problem no. 0$: #he administrator of 3alea Hills hospitals would you li+e a cost formula lin+ing the costs involved in admitting patients to the number of patients admitted during a month. #he admitting department costs and the number of patients admitted during the immediately preceding " months are given in the table on following pages: %onth
&umber of patients '"mitte"
4ay un uly ugust 6eptember 7ctober November 8ecember
("00 (/00 (!00 (00 (500 (00 ((00 (500
'"mitting (epartmental Costs (1!00 (5'00 (!00 (1000 (100 ((00 ('"00 (100
Requirements: (. se the high low method to establish the fi&ed and variable components if admitting costs. '. 9&press the fi&ed and variable components of admitting in the linear euation from y;a
Problem &o. 0): #he =a+eshore Hotel-s >uest days of occupancy and custodial supplies e&penses over the last seven months were: %onths 4arch pril 4ay un uly august 6eptember
*uest (a+s of Occupanc+ 1,000 500 "000 (0500 ('000 /000 !500
Custo"ial ,upplies -penses !500 "'50 (0500 ('000 ('500 (0!50 /!50
>uests days in a measure of the overall activity at the hotel. %or e&les a guest who stays at the hotel for three days is counted as three guest days. Require": (. se the high low method, estimate cost formula for custodial supplies e&pense. '. sing the cost formula you derive above, what amount of custodial supplies e&penses. ?ould you e&pect to be incurred at an occupancy level of ((000 guest days)
Problem no. 0/: @abel Company a wholesaler of large custom built air conditioning units for commercial buildings, has noticed considerable fluctuation in it-s shipping e&pense from month to month as shown below: %onths anuary %ebruary 4arch pril 4ay un uly
!nits shippe" ( ! 5 ' "
Total shipping epenses ''00 (00 '00 (500 ''00 000 00
Require": (. sing the high low method, estimate the cost formula for custodial supplies e&pense. '. #he president has no confidence in the high low method and would you li+e to Achec+outB your results using the scatter graph method. 8o the following: a. *repare a scatter graph, using the data given above, plot cost on the vertical a&is and activity on the hori3ontal a&is. %it a straight line to your plotted points using a ruler. b. sing a scatter graph, estimate the appro&imate variable cost per shipped and the appro&imate fi&ed cost per month with the uic+ and dirty method. Problem no. 0: #he number of Drays ta+en and &Dray costs over the last nine month in Eeverly Hospital are given below:
%onth anuary %ebruary 4arch pril 4ay un uly ugust 6eptember Require": (. '.
2ra+s ta3en ,'50 !,000 5,000 1,'50 1,500 ,000 ,!50 5,500 5,!50
2ra+ costs '",000 '/,000 ',000 '0,000 '',000 (!,000 (",000 '1,000 ',000
sing the high low method, estimate the cost formula for &Dray costs. sing the cost formula you derive above, what &Dray costs would you accept to incurred during a month in which 100 &Drays are ta+en)
