QUESTION 1

[a]
Change in Cost ═ 2700 - 1200 $1,500
Change in Activity 8.00 - 2.00 6
b═ $250
a = y - bx
a = 1200 - [250(2) a═ $700

y = $250(x) + $700

[b] Total
Units Shipping
n Month Shipped Expenses
x y xy x2 y2
1 January 3 $1,800 $5,400 9 $3,240,000
2 February 6 $2,300 $13,800 36 $5,290,000
3 March 4 $1,700 $6,800 16 $2,890,000
4 April 5 $2,000 $10,000 25 $4,000,000
5 May 7 $2,300 $16,100 49 $5,290,000
6 June 8 $2,700 $21,600 64 $7,290,000
7 July 2 $1,200 $2,400 4 $1,440,000
$35 $14,000 $76,100 $203 $29,440,000

Solving the equations for b, a and r² yields:

n ∑ xy −( ∑ x )( ∑ y ) 7(76,100) - (35)(14000)
b=
n ∑ x −( ∑ x )
2 2 7(203) -(35)2

$532,700 ▬ 490000
$1,421 ▬ $1,225
b ═ $217.86

a= ȳ−b x̄
a = 14000/7 - [217.86(35/7)]

a = 910.7

y = $217.86(x) + $910.70

[c] 2
[n ∑ xy −( ∑ x ) ( ∑ y ) ]

[n ∑ x 2 −( ∑ x )2 ] [ n ∑ y 2 −( ∑ y )2 ]
r 2 =¿ ¿ ¿
¿

(532700 ▬ 490000)2
196 [ 7(29,440,000) - (14,000)2 ]

[42700]2
[196] [[206,080,000] - [196,000,000]]

$1,823,290,000
[196] [[206,080,000] - [196,000,000]]

$1,823,290,000
[196] [10080000]

$1,823,290,000
$1,975,680,000

r2 = 0.9228670635 92.29%
[d] TC = $217.86(1) + $910.70 = $1,128.56
 QUESTION 2
[a]
Change in Cost ═ 31500-14000
Change in Activity 4200-1400
b═ $6.25
a = y - bx
a = 31500 - [6.25(4200)] a═ $5,250
y = $6.25(x) + $5,250

[b] Electricity
n Month Machine hrs. Costs
x y xy x2 y2
1 January 2000 $18,900 $37,800,000 4,000,000 $357,210,000
2 February 2400 $21,500 $51,600,000 5,760,000 $462,250,000
3 March 1400 $14,000 $19,600,000 1,960,000 $196,000,000
4 April 2600 $23,500 $61,100,000 6,760,000 $552,250,000
5 May 3300 $28,750 $94,875,000 10,890,000 $826,562,500
6 June 3300 $22,700 $74,910,000 10,890,000 $515,290,000
7 July 3600 $25,250 $90,900,000 12,960,000 $637,562,500
8 August 3000 $23,250 $69,750,000 9,000,000 $540,562,500
9 September 1500 $16,000 $24,000,000 2,250,000 $256,000,000
10 October 3300 $26,500 $87,450,000 10,890,000 $702,250,000
11 November 4200 $31,500 $132,300,000 17,640,000 $992,250,000
12 December 4200 $22,250 $93,450,000 17,640,000 $495,062,500
34,800 274,100 837,735,000 110,640,000 6,533,250,000

Solving the equations for b, a and r² yields:

n ∑ xy −( ∑ x )( ∑ y ) 12(837,735,000) - (34,800)(274,100)
b=
n ∑ x 2 −( ∑ x )2 12(110,640,000) -(34,800)2

10,052,820,000 ▬ 9,538,680,000 514,140,000

1,327,680,000 ▬ 1,211,040,000 116,640,000
b ═ $4.41

a= ȳ−b x̄
a = 274,100/12 - [4.41(34,800/12)]

a = 10058.6934156379

y = $4.41(x) + $10,058

[c] 2
[n ∑ xy −( ∑ x )( ∑ y )]

[n ∑ x 2 −( ∑ x )2 ] [n ∑ y 2 −( ∑ y )2 ]
r 2
=¿ ¿
¿ ¿

( 514,140,000 )2
116,640,000 [12(6,533,250,000) - (274,100)2
78,399,000,000
$264,339,939,600,000,000
[116,640,000] [[78,399,000,000] - [75,130,810,000]] 75,130,810,000

$264,339,939,600,000,000
[116,640,000] [3,268,190,000] 3,268,190,000

$264,339,939,600,000,000
381,201,681,600,000,000

r2 = 0.69 69%
[d] TC = $4.41(1300) + $10,058 = $15,791
QUESTION 3
Labour Electrical
n Month Hours Costs xy x2 y2
1 January 84.0 $750 $63,000 7056 $562,500
2 February 84.0 $750 $63,000 7056 $562,500
3 March 88.0 $790 $69,520 7744 $624,100
4 April 80.5 $730 $58,765 6480.25 $532,900
5 May 78.0 $690 $53,820 6084 $476,100
6 June 79.0 $720 $56,880 6241 $518,400
7 July 89.0 $800 $71,200 7921 $640,000
8 Aug 80.5 $730 $58,765 6480.25 $532,900
663 5,960 494,950 55,063 4,449,400

Solving the equations for b, a and r² yields:

n ∑ xy −( ∑ x )( ∑ y ) 8(494,950) - (663)(5960)
b=
n ∑ x −( ∑ x ) 2 2 8(55063) -(663)2

3,959,600 ▬ 3,951,480 8,120

440,500 ▬ 439,569 931
b ═ $8.72

a= ȳ−b x̄
a = 5960/8 - [8.72(663/8)]

a = 22.18
Using labour hours
y = $8.72(x) + $22.18

[c] 2
[n ∑ xy −( ∑ x )( ∑ y )]

[n ∑ x 2 −( ∑ x )2 ] [n ∑ y 2 −( ∑ y )2 ]
r 2
=¿ ¿
¿ ¿

( 8,120 )2
931 [8(4,449,400) - (5,960)2
35,595,200
$65,934,400
[931] [[35,595,200] - [35,521,600]] 75,130,810,000

$65,934,400
[931] [73600] 35,521,600

$65,934,400
68,521,600
73,600
r 2=
0.96 96%
 Machine Electrical
n Month Hours Costs xy x2 y2
1 January 72.0 $750 54,000 5,184 562,500
2 February 73.0 $750 54,750 5,329 562,500
3 March 77.0 $790 60,830 5,929 624,100
4 April 69.0 $730 50,370 4,761 532,900
5 May 66.0 $690 45,540 4,356 476,100
6 June 71.0 $720 51,120 5,041 518,400
7 July 80.0 $800 64,000 6,400 640,000
8 Aug 63.0 $730 45,990 3,969 532,900
571 5,960 426,600 40,969 4,449,400

Solving the equations for b, a and r² yields:

n ∑ xy −( ∑ x )( ∑ y ) 8(426,600) - (571)(5960)
b=
n ∑ x −( ∑ x )
2 2 8(40,969) -(571)2

3,412,800 ▬ 3,403,160 9,640

327,752 ▬ 326,041 1,711
b ═ $5.63

a= ȳ−b x̄
a = 5960/8 - [5.63(571/8)]

a = 342.86
Using Machine hours
y = $5.63(x) + $342.86

[c] 2
[n ∑ xy −( ∑ x )( ∑ y ) ]

[n ∑ x 2 −( ∑ x )2 ] [n ∑ y 2 −( ∑ y )2 ]
r 2 =¿ ¿ ¿
¿

( 9,640 )2
1,711 [8(4,449,400) - (5,960)2
35,595,200
$92,929,600
[6927] [[35,595,200] - [35,521,600]] 75,130,810,000

$92,929,600
[6927] [73600] 35,521,600

$92,929,600
125,929,600 509827200
73,600
r2 = 0.74 74%
 Direct
Machine Labour Electrical
n Month Hours Hours Costs Results from the Multi-regression
1 January 72.0 84.0 $750
2 February 73.0 84.0 $750 8.565612505 0.1323155216 25.6808433297
3 March 77.0 88.0 $790 1.569293512 1.1575879971 70.9649320902
4 April 69.0 80.5 $730 0.962340967 8.3242189342 #N/A
5 May 66.0 78.0 $690 63.88513514 5 #N/A
6 June 71.0 79.0 $720 8853.536896 346.4631043257 #N/A
7 July 80.0 89.0 $800
8 Aug 63.0 80.5 $730 y = $0.13/MH + $8.56/DLH + $25.68
571 663 5,960 r2 = 96.23%
763.5338345865
(b)
If Single variable regression is used then the variable with highest r2 (DLH) would yield the best estimate 3074.812030075

TC = $8.72(85) + $22.18 = $764

If multi-regression is used then the best estimate would be as follows:

TC = $0.13(65) + $8.56(85) +$25.68 $762

QUESTION 4
Total
Machine Overhead
Month Hours Expenses

January 70,000 $198,000

February 60,000 $174,000
March 80,000 $222,000
April 90,000 $246,000

At Lowest Activity level (60,000 hours):

per MH
Utilities (all variable) ═ $48,000 $48000/60000MH
═ $0.80 per MH

Supervisors Salaries (all fixed) ═ $21,000

Maintenance (semi-variable) ═ $105,000

$174,000
4b
At Highest Activity level (90,000 hours): Maintenance cost = Total overhead minus
Utilities minus Supervisors Salaries.
Utilities = 0.8 x the # of hours
Utilties (all variable) [0.8 x 90,000] ═ $72,000 Supervisors Salaries = 21,000

Supervisors Salaries (all fixed) ═ $21,000

Maintenance (Semi-variable) ═ $153,000 Answer to 4 (b)

$246,000
Answer to 4 (c)
To determine the cost function for Maintenance

Change in Cost 153000 -105,000 $48,000 ═ $1.60 per MH per MH

Change in Machine hours 90,000 - 60,000 30000

To determine Fixed maintenance cost

TC = VCx + FC

FC = TC - VCx
FC = 153,000 - $1.60(90,000) = $9,000

TC = $1.60(x) + $9,000

Answer to 4 (a)
To determine a cost function for Total Overheads

To determine Variable Overhead cost

Change in Total Cost 246,000-174,000 $72,000 ═ $2.40 per MH

Change in Machine hours 90,000-60,000 30000

To determine Total Fixed Overhead cost

TC = VCx + FC

FC = TC - VCx
FC = 246,000 - $2.40(90,000) ═ $30,000

TC = $2.40(x) + $30,000

Answer to 4 (d)
To determine Total Overheads for 75,000 Machine hours
TC = $2.40(75,000) + $30,000 ═ $210,000.00
QUESTION 5

OUTPUT UNITS Change VC per unit Fixed Costs

Costs 1800 units 2400 units 600
$ $
Labour 9,000 11,400 2,400 2400/600= $4.00 11400-($4x2400)= $1,800.00 SVC
Materials 12,600 16,800 4,200 4200/600= $7.00 16800-($7x2400)= $0.00 VC
Admin Expenses 6,000 6,000 0 ─ ─ $6,000 FC
Power 1,300 1,550 250 250/600= $0.42 1550-($0.42x2400)= $550.00 SVC
Depreciation 9,000 12,000 3,000 3000/600= $5.00 12000-($5x2400)= $0.00 VC
Rates 8,500 8,500 0 ─ ─ $8,500 FC
Indirect Labour 1,460 1,460 0 ─ ─ $1,460 FC
Selling costs 6,100 7,300 1,200 1200/600= $2.00 7300-($2x2400)= $2,500.00 SVC
$16.42 $20,810.00

(c)
VC Total Variable for Total Total
Costs per unit 2000 units Fixed Costs
Labour $4.00 $8,000 $1,800 $9,800
Materials $7.00 $14,000 $0 $14,000
Admin Expenses ─ $6,000 $6,000
Power $0.42 $833 $550 $1,383
Depreciation $5.00 $10,000 $0 $10,000
Rates ─ $0 $8,500 $8,500
Indirect Labour ─ $0 $1,460 $1,460
Selling costs $2.00 $4,000 $2,500 $6,500
$36,833 $20,810 $57,643

Question 6
(a) To determine Fixed costs we must first determine the VC per $ of sale

July August Change in Cost 400,000 - 340,000

Sales 560,000 740,000 Change in Sales 740,000 -560,000
Profit 220,000 340,000
Cost 340,000 400,000 ═ $0.33 per $ of Sales

To determine Fixed costs

TC = VCx + FC

FC = TC - VCx
FC = 400,000 - $0.33(740,000) ═ $153,333

TC = $0.33(x) + $153,333

(d) To determine Total Overheads for 75,000 Machine hours

TC = $0.33(650,000) + $153,333 ═ $370,000
Question 7

Total Total Unit Unit

Variable Fixed Total Variable Fixed Volume
Cost Cost Cost Cost Cost in units
Product (TVC) (TFC) (TC) (UVC) (UFC) (V)

1 (a) $70,000 $50,000 $120,000 (b) $7 $5 (c) 10,000

2 $100,000 (d) $200,000 (e) $300,000 (f) $2 $4 50,000

3 $15,000 (g) $150,000 $165,000 $15 (h) $150 (i) 1000

4 (j) $700,000 $100,000 $800,000 (k) $35 (l) $5 20,000