C.

Segregation of cost a)By using High-Low point method

High cost − Low cost
The process of separating the semi variable costs into variable and a) VCPU (b)=
High unit − Low unit
fixed cost is known as segregation of semi-variable cost. The methods 1100 − 500 600
or segregating semi variable cost: = 1000 − 400 =600 = Rs. 1 per unit
a) High-low point method or Two point method b) Fixed cost (a) =Total cost (y) – (VCPU × Level of output)
b) Least-square method Fixed cost (a) = 500 - (1x 400) = 500 - 400 = Rs 100
c) Graphical method b) By using Least Square Method
X Y XY X2
1) High-low point Method 400 500 200,000 160,000
High cost − Low cost
Variable cost per unit (VCPU) or b = High unit − Low unit or 500 600 300,000 250,000
Difference in cost
800 900 720,000 640,000
b= 1000 1100 11,00,000 10,00,000
Difference in output/unit
Fixed cost (a) =Total cost (y) – (VCPU × Level of output) ∑ 𝑥=2700 ∑ 𝑦=3100 ∑ 𝑥𝑦=23,20,000 ∑ 𝑥 2=20,50,000

2) Least square method VCPU (b) = N  xy   x y

VCPU (b) = N  xy   x y N  x 2   x 
2

N  x 2   x 
2
4x232000 – 2700x3100 910000
VCPU (b) = =910000 =Rs.1/unit
4x2050000 – (2700)2

 y  b x
Fixed cost (a) =
N Fixed cost (a) =  y  b x 3100−1×2700
=
400
=4 =Rs. 100
N 4

Estimation of cost Estimation of cost

Total cost = Fixed cost + (VCPU X Level of output)
Total cost = Fixed cost + variable cost
Y = a + b. x Y = a+ bx
Budgeted allowance: FC + (b x LA)
Y = 100+ 1. x
when, X= 700 units
Example: y = 100+ 1x700 =Rs.800
Months Baisakh Jestha Asadh Shrawan When, x= 900 units
Output (in units) 400 500 800 1000 y = 100 + 1 x900 =Rs. 1000
Total mixed cost(Rs.) 500 600 900 1100
From the above information, calculate VCPU and fixed cost by using
both method and also calculate total estimated cost for 700 & 900
units.
 Difference in cost
Variable cost per unit (VCPU) b= Difference in output/unit
Numerical Questions:
Brief Answer Questions: 2000
1) The following data are provided: = Rs 0.5 per unit
8000−4000
Output in units 1000 2000 3000
Total Cost Rs 5000 8000 11000 Fixed cost(a)= Total cost-(VCPU× level of output)
Required: = 40,000-(Rs Rs 0.5× 8000)
a) Variable cost per unit using high low point method. = Rs 36,000
b) Fixed Cost
4) The following equation of manufacturing company is as below
High-low point Method Total Cost =Fixed cost + (VCPU X Units)
High cost − Low cost = Rs 10000 + (5 × units)
Variable cost per unit (VCPU) or b = Required:
High unit − Low unit
11000 − 5000 a) Total cost for producing 2000 units
b= = Rs 3 per unit
3000 − 1000 b) How many units can be produced with a total cost of Rs 40000
Fixed cost(a)= Total cost-(VCPU× level of output) Solution
= 5000-(Rs 3× 1000) a) Total Cost =Fixed cost + (VCPU X Units)
= Rs 2000 = 10000 + (5 × 2000)
2) Repair and Maintenance cost and machine hour provided by an = Rs 20000
industry are:
Machine hours 100 200 300 400 b) Total Cost =Fixed cost + (VCPU X Units)
Repair & Maintenance cost 500 600 700 800 40,000 = 10000 + (5 × units)
Required: Units = 6000 units
a) Variable cost per unit using high low point method. 5) The fixed cost of a company for a certain period is Rs 40,000
b) Fixed Cost and normal capacity for that period is 1000 units. Cost per unit
is Rs 100.
Required: VCPU and total cost for 900 units
3) The difference in cost for repair and maintenance is Rs 2000
between 8000 and 4000 units of output.
Solution
Required:
Fixed cost (a) = Rs 40,000
a) Variable cost per unit.
Normal capacity = 1000 units
b) Amount of fixed Cost if the total cost of 8000 units is Rs 𝑇𝑜𝑡𝑎𝑙 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡 40000
40,000. Fixed cost per unit = Rs 40 per unit
𝑁𝑜𝑟𝑚𝑎𝑙 𝑐𝑎𝑝𝑎𝑐𝑖𝑡𝑦 1000
Variable cost per unit (b) = Total cost per unit – Fixed cost per unit
 = Rs 100 – Rs 40 3) The difference in total cost is Rs 1,60,000 between the activity
= Rs 60 per unit level for 60,000 units and 30,000 units. The total fixed cost is
Total cost for 900 units Rs 1,60,000.
Total cost = Fixed cost + (VCPU X Level of output) Required:
40000 +(Rs 60 × 900 units) a) Variable cost per unit
Rs 94,000 b) Total cost for 30000 units
Short Answer Questions: c) Production units when total cost is Rs 6,50,000
1) The following figures relate to a factory for the three month. Solution:
Difference in cost
Months Output in units Cost Rs a) Variable cost per unit (VCPU) b= Difference in output/unit
Baisakh 100 300 160,000
Jestha 200 500 = = Rs 5.33 per unit
30,000
Ashad 300 700 b) Total cost = Fixed cost + (VCPU X Level of output)
Required: Segregation of cost into variable and fixed 160,000 +(Rs 5.33 × 30000 units)
component using high-low point method. Rs 3,19,900
2) The following data has been provided to you. c) Total Cost =Fixed cost + (VCPU X Units)
Units 100 200 300 400 500 650,000 = 160,000 + (5.33 × units)
Cost Rs 5000 7000 9000 12000 14500 Units = 91,932.46 units
Required: 4) Following information are given below:
a) Segregate the cost into variable and fixed using suitable Production Units 4,000 9,000
method. Total cost Rs 85,000 1,50,000
b) Total cost for 1000 units. Required: By using high and low point method.
Solution: a) Variable cost per unit
High cost − Low cost b) Amount of fixed cost
a) Variable cost per unit(b) =
High unit − Low unit c) Total cost for the production of 5000 units
14500 − 5000
= = Rs 23.75 d) Production units when total cost is Rs 1,80,000
500 − 100
Fixed cost (a) = Total cost-(VCPU× level of output) 5) The following are the manufacturing cost in the factory for 4
= 14500-(Rs 23. 75 × 500) months with corresponding machine hours.
= Rs 2625 Months Baisakh Jestha Ashad Shrawan
b) Calculation of total cost for 1000 units Machine hours 400 500 600 700
Total cost = Fixed cost + (VCPU X Level of output) Manufacturing cost Rs 600 700 780 920
2625+ (Rs 23.75 × 1000 units) Required: Segregation of cost using least square method.
Rs 26,375
 Solution: Least Square method Least square method (In 10,000)
Months Output X Total Cost XY X2 Month Labour hr Supervision XY X2
Y X Cost Y
Baisakh 400 600 240000 160000 Jan 2 60 120 4
Jestha 500 700 350000 250000 Feb 3 80 240 9
Ashad 600 780 468000 360000 March 4 100 400 16
Shrawan 700 920 644000 490000 April 5 120 600 25
N=4 ∑ 𝑿= 2200 ∑ 𝒀= 3000 ∑ 𝑿𝒀=1702000 ∑ 𝒙𝟐 =12,60,000 May 6 140 840 36
VCPU (b) = N  xy   x y June 7 160 1120 49
N  x 2   x  ∑ ∑ 𝒀= 660 ∑ 𝑿𝒀=3,320 ∑ 𝒙𝟐 =139
2
N=6 𝑿= 27

VCPU (b) =
4x1702000 – 2200x3000 208000
=200000 =Rs.1.04/unit Variable cost per machine hour (b) = N  xy   x y
N  x 2   x 
4x1260000 – (2200)2 2

6x3,320 – 27x660
Fixed cost (a) =  y  b x 3000−1.04×2200
= =4
400
=Rs. 178
= 6x139 – (27)2
=Rs.20 per labour hour
N 4
Fixed cost (a) =  y  b x =
660−20×27
=Rs.20 or Rs 2,00,000
6) You are given the following information: N 6
Machine hours 200 300 400 500 Total cost Y = a + bX
Overhead Rs 300 400 500 600 = 2,00,000 + 20X
Required: Segregation of overhead into variable and fixed by
using least square method. When X = 25000 hrs
7) Following data are given to you: Total cost = 2,00,000 + 20 × 25000
Month Labour hr(000) Supervision cost(0000) = Rs 7,00,000
Jan 20 60
Feb 30 80 When X = 35000 hrs
March 40 100 Total cost = 2,00,000 + 20 × 35000
April 50 120 = Rs 9,00,000
May 60 140
June 70 160
When X = 45000 hrs
Required:
Total cost = 2,00,000 + 20 × 45000
a) Segregation of cost using least square method
b) Estimate the total cost for 25000 hrs, 35000 hrs, 45000 hrs = Rs 11,00,000
c) Labour hours for the total cost of Rs 13,00,000 8) The details of cost of goods sold at various level of sales
activities of a manufacturing company have been presented
below.
 Production Units ‘00’ Cost of goods sold Rs ‘000’ 10,000 − 4000
= = Rs 2 per unit
100 300 4000 − 1000
200 400 Fixed cost (a) = Total cost – VCPU × Level of activity
300 500 = 10,000 - 2× 4000
400 600 = Rs 2,000
500 700 Total cost of Jestha (Y) = Fixed cost + Variable cost
Selling price per unit will be Rs 20 per unit = Rs 2000 + VCPU × Level of activity
Required: = Rs 2000 + Rs 2 × 2000
a) Segregation of cost by using least square method. = Rs 6,000
b) Sales volume required to earn after tax profit of Rs 1,50,000 (Tax
rate 50%)
Comprehensive Answer Questions Total cost of Ashad (Y) = Fixed cost + Variable cost
1) Following data are given to you are required to fill in the blank. = Rs 2000 + VCPU × Level of activity
Month Output(Units) Cost (Rs) = Rs 2000 + Rs 2 × 3000
Baisakh (?) 4,000 = Rs 8,000
Jestha 2,000 (?) Least square method ( ‘000’)
Ashad 3,000 (?) Month Output X Cost Y XY X2
Shrawan 4,000 10,000 Baisakh 1 4 4 1
Mean output is 2,500 units Jestha 2 6 12 4
Required: Ashad 3 8 24 9
a) Find the value of missing figure Shrawan 4 10 40 16
b) Segregate the cost by using least square method N=4 ∑ 𝑿= 10 ∑ 𝒀= 28 ∑ 𝑿𝒀=80 ∑ 𝒙𝟐 =30
c) Determine the total cost for 4,320 units Variable cost per unit (b) = N  xy   x y
Solution: N  x 2   x 
2

Output of Baisakh = ? 4x80 – 10x28

𝑇𝑜𝑡𝑎𝑙 𝑜𝑢𝑡𝑝𝑢𝑡 = =Rs.2 per unit
Mean output = 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑚𝑜𝑛𝑡ℎ 4x30– (10)2

𝑥+2,000+3,000+4,000 Fixed cost (a) =  y  b x

=
28−2×10
=Rs.2 or Rs 2,000
2500 = N 4
4
Therefore, output of Baisakh (x) = 1000 units Total cost for 4,320 units
Total cost Y = a + bX
Total cost of Jestha = ? = 2,000 + Rs2× 4,320 units
High cost − Low cost = Rs 10,640
We have, Variable cost per unit(b) =
High unit − Low unit