HEIDEN C.

PINUELA BSA II September 4, 2020

Strategic Cost Management
Mr. Wilfredo Mondido

Lesson 2
TEST 2
Westinghouse Company
Month Machine Hours (x) Electricity Costs (y) xy x²
May 6 000 60 000 360 000 000 36 000 000
July 5 000 53 000 265 000 000 25 000 000
August 4 500 49 500 222 750 000 20 250 000
September 4 000 46 000 184 000 000 16 000 000
October 3 500 42 500 148 750 000 12 250 000
November 3 000 39 000 117 000 000 9 000 000
Total (∑) 26 000 290 000 1 297 500 000 118 500 000

a. Variable Cost per machine hour

 High-Low Method
Machine Hours Electricity Cost
Highest 6 000 60 000
Lowest 3 000 39 000
3 000 21 000

Variable cost per unit 21 000 / 3 000 = P7

 Least Square Method

Eq2 ∑y = na + b∑x
290 000 = 6a + 26 000
Eq3 ∑XY = ∑xa = b∑x²
1 297 500 000 = 26 000s + 118 500 000b

Eq2 (4 333.33) 290 000 = 6a +26 000b (4 333.33)

1256 666 666.66 = 26 000a + 112 666 666.66b

Eq3 1 297 500 000 = 26 000a + 118 500 000b

Eq2 1256 666 666.66 = 26 000a + 112 666 666.66b
40 8333 333.34 = 5 833 333.34
5 833 333.34 5 833 333.34
b= 6.99999999211

b. Fixed Electricity Cost

 High-Low Method
Highest Lowest
Total Cost of Electricity 60 000 39 000
Less: Variable Portion (7/machine hr) 42 000 21 000
Month Fixed Cost 18 000 18 000

 Least Square Method

Eq2 ∑y = na + b∑x
290 000 = 6a + 26 000 (6.99999999211)
290 000 - 181 999.99 = 6a
a = P18 000
c. Total Electricity cost if 4 800 machine hours are projected to be used next month

 High-Low Method

y = a + bx
y = 18 000 + 7 (4 800)
y = 51 600

 Least Square Method

y = a + bx
y = 18 000 + 33 599. 9999621
y = 51 599. 9999621 or 51 600
TEST III.
Month Factory Power Cost (y) xy x²
Machine hr (x)
January 13 900 24 400 339 160 000 193 210 000
February 17 600 30 300 533 280 000 309 760 000
March 16 800 29 000 487 200 000 282 240 000
April 13 200 22 340 294 880 000 174 240 000
May 11 600 19 900 230 840 000 134 560 000
June 6 600 14 900 98 340 000 43 560 000
August 14 150 25 680 363 372 000 200 222 500
September 6 660 14 900 99 234 000 44 355 600
November 14 300 26 000 371 800 000 204 490 000
December 14 250 25 900 369 075 000 203 062 500
February 13 500 23 900 322 650 000 182 250 000
March 16 741 28 500 477 118 500 280 261 081
April 11 452 19 800 226 749 600 131 148 304
May 14 321 26 000 372 346 000 205 091 041
June 15 000 27 000 405 000 000 225 000 000
July 7 000 15 860 111 020 000 49 000 000
August 5 000 12 651 63 255 000 25 000 000
September 11 483 19 552 224 515 616 131 859 289
October 13 350 23 566 314 606 100 178 222 500
Total 236 907 430 149 5 699 441 816 3 197 532 815
Requirement I. High-Low Method
1. Variable portion of power costs per factory machine hour
Factory Machine Hr Power Cost
Highest 30 300 17 600
Lowest 12 651 5 000
17 649 12 600

Variable portion of power costs per factory machine hour

17 649/ 12 600 = 1. 40071428571

High Low
Total Power Cost 30 300 12 651
Less: Variable Portion 24 652. 5714284 7 003. 57142855
Monthly Fixed Cost 5 647.4285716 5 647. 4285715

2. Fixed power cost

y = a + bx
y = 5 647. 4285716 + 1. 4007148571 (10 000)
y = 19 654.5771426

3. Requirement II. Least Square Method

Eq2 ∑y = na + b∑x
430 149 = 19a + 236 907b

Eq3 ∑XY = ∑xa = b∑x²

5 699 441 816 = 236 907a + 3 197 532 815b
1. Variable portion of power costs per factory machine hour
Eq2 (12 468.7894736) 430 149 = 19a + 236 907b (12 468. 7894736)
5 363 437 323.27 = 236 907a + 2 953 943 507. 82b

Eq3 5 699 441 816 = 236 907a + 3 197 532 815b

Eq2 5 363 437 323.27 = 236 907a + 2 953 943 507. 82b
336 004 492.73 = 243 589 307.18b
243 589 307.18 243 589 307.18

b= 1. 37938933617

2. Fixed power cost

430 149 = 19a + 236 907 (1. 37938933617)
430 149 - 326 786.989464 = 19a
a = 5 440. 10581768
Eq2 ∑y = na + b∑x
y = a + bx
y = 5 440.10581768 + 1.37938933617 (12 000)
y = 21 992. 7778516
3.