Br Ex 6-1 cups of coffee served in a week

3000 3200 3400

1 fixed cost 2200 2200 2200
variable cost 540 576 612
total cost 2740 2776 2812
cost per cup of coffee serv 0.913 0.868 0.827

2 The average cost of a cup of coffee declines as the number of cups of coffee served increa
fixed cost is spread over more cups of coffee.

Exercise 6-1
Days Cost
1 March 18000 22500
April 12500 20850
May 15000 20250
June 28500 28850
July 24000 27100
August 19000 22750
September 14500 20750

Cost Days
High activity level (June) 28,850 28500
Low activity level (April) 20,850 12500
8,000 16000 0.50
Variable cost portion:
Change in expense/Change in activity $ 0.50 VC of custodial supplies occ. Day

y = a + bx
Total cost = Fixed cost + (variable cost/unit x # of units)
At 28,500 days:
28,850 = FC + (0.50 x 28,500)
FC = 28,850 - (0.50 x 28,500)
FC = 28,850 - 14,250
FC = 14600

The cost formula is $14,600 per month plus $0.50 per guest-day or Y = $14,600 + $0.50x
2 Custodial supplies expense for 13,000 guest-days:

Variable cost

13,000 guest-days x 0.50 per guest-day 6500

Fixed cost 14,600

Total cost 21,100
 Ex 6-3

Cost
35000
er of cups of coffee served increases because the
30000
f(x) = 0.576634827332843 x + 12460.3600293902
25000

20000

15000

10000

5000

0
10000 12000 14000 16000 18000 20000 22000

of custodial supplies occ. Day

3 The high method would not provide an accurate cost because

est-day or Y = $14,600 + $0.50x
Ex 6-5

1 Kilometres DriTotal Annual Cost

High level of activity 114800 14350
Low level of activity 70000 10150
Change 44800 4200
114,800 km x 0.125/km 14350
70,000 km x 0.145/km 10150

variable cost per kilometre 0.09375

Fixed cost per year:

total cost at 70,000 kilome 10150
less variable portion 6562.5
Fixed cost per year 3587.5

2 Y = 3,587.50 + 0.09375X

3 Fixed cost 3587.5

variable cost
80,000 km x 0.09375/km 7500
Total annual cost 11087.5
 Cost

32843 x + 12460.3600293902

000 18000 20000 22000 24000 26000 28000 30000

rovide an accurate cost because the slope would be flatter and cutting the cost axis at about $12,500
tal Annual Cost
Pr 6-5
1. Maintenance cost at the 150,000 direct labour-hour level of activity can be isolated as follows:

Direct labour-hours Total factory overhead costs

High 150,000 15,275,000
Low 100,000 12,450,000
50,000 2,825,000

Indirect materials (V) 4,200,000 6,300,000

Rent (F) 5,500,000 5,500,000
Maintenance (M) 2,750,000 3,475,000
Total factory overhead costs 12,450,000 15,275,000

42 per DLH

2 Maintenance cost
3,475,000
2,750,000
725,000
Variable cost element
Change in cost/Change in activity

Fixed cost element:

Total cost at the high level of a 3,475,000

Less variable cost element 2175000
Fixed cost element 1,300,000
Y = ¥1,300,000 + 14.50X.

3 Total factory overhead cost at 70,000 direct labour-hours would be:

Indirect materials
(70,000 DlH x ¥42 per DLH) 2,940,000
Rent 5,500,000
Maintenance:
Variable cost element
(70,000 DLH x ¥14.50 per DLH) 1,015,000
Fixed cost element 1,300,000
Total factory overhead cost
 Pr 6-7 March June
can be isolated as follows:
1 DM 50000 90000
DL 60000 108000
MOH 181000 193000
291000 391000
+ B WIP 29000 21000
320000 412000
-E WIP 52000 15000
CGM 268000 397000

Cost Units
High 193000 9000
Low 181000 5000
12000 4000

y = a + bx
193,000 = a + ($3.00 x 9000 units)
a= 166,000.00

14.5 2 y = 166,000 + (3.00 X # of units)

3 DM 80000
DL 96000
MOH 190000
366000
+ B WIP 18000
384000
- E WIP 10000
0 direct labour-hours would be: CGM 374000

2,315,000
10,755,000
3 units