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Akaun Project Partb1 Edited

This document analyzes production and cost data for a farm from 2008 to 2015. It uses three methods - scatter diagram, high-low, and least squares regression - to estimate the farm's fixed and variable costs. The scatter diagram method estimates fixed costs as $50,665 and variable costs as $0.67 per unit. This method provides the best estimates. Calculations then show the farm's average sales price, contribution margin, and contribution margin ratio. The break-even point is estimated at 460,590 units. As the farm's annual sales exceeded this amount, it gained profits each year.

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Byakuya Bleach
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49 views

Akaun Project Partb1 Edited

This document analyzes production and cost data for a farm from 2008 to 2015. It uses three methods - scatter diagram, high-low, and least squares regression - to estimate the farm's fixed and variable costs. The scatter diagram method estimates fixed costs as $50,665 and variable costs as $0.67 per unit. This method provides the best estimates. Calculations then show the farm's average sales price, contribution margin, and contribution margin ratio. The break-even point is estimated at 460,590 units. As the farm's annual sales exceeded this amount, it gained profits each year.

Uploaded by

Byakuya Bleach
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Year

2008
2009
2010
2011
2012
2013
2014
2015

Unit Produced
616,427
633,715
619,236
720,343
759,686
742,230
714,021
784,547

Total Cost
449093
442065
432566
522199
560543
577112
571177
632161

Fixed cost = $50665 based on the data


Scatter Diagrams

Y-Values
700000

600000

500000

400000

300000

200000

100000

0
600,000

650,000

Variable cost per unit=

700,000

750,000

Changecost $ 560543$ 50665


=
=$ 0.67 per unit
Changeunits
7596860

800,000

High-Low Method

Y-Values
700000

600000

500000

400000

300000

200000

100000

0
600,000

650,000

700,000

750,000

800,000

Fixed cost get negative, therefore this method is not logic and cannot be
used.

Least-Squares Regression

The regression equation is y=-2.27E5+1.07*x


Fixed cost will be the y intercepts of the equation which is -2.27E5. Hence
the method is not logic and cannot be used because fixed cost cannot be
negative.

Out of the 3 methods, scatter diagram method give the best estimation on
the variable cost per unit.
Estimation Method
Scatter diagram

Fixed cost
$50665

Variable cost

$ 0.67

Contribution margin per unit = Sales price per unit Total variable cost per
unit
Contribution margin ratio =

Contribution margin per unit


Sales per unit

Break-even point in units =

costs
Contribution margin per unit

Age
2008
2009
2010
2011
2012
2013
2014
2015

Sales price per


unit
0.74
0.75
0.77
0.81
0.79
0.80
0.83
0.78

Mean sales prices =

Contribution margin
per unit
0.07
0.08
0.10
0.14
0.12
0.13
0.16
0.11

Contribution margin
ratio
0.09
0.11
0.13
0.17
0.15
0.16
0.19
0.14

of sales price per unit for each year


8

6.27
8

= 0.78 per unit


Mean contribution margin per unit = 0.11
Mean contribution margin ratio = 0.14
Break- even points in units =

50665
0.11

= 460,590 units
From the break-even points units calculated, we notice that from year
2008 to year 2015, the farm has sales exceed the break-even point units
which is 460,590. This shows that every year the farm gains higher
revenue than the sum of variable cost and fixed cost and the profit for the
farm is positive.

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