Dear Tayba
You had posted the same question a weeks ago, I think you are not following your thread after posting ,
anyway please go through the below mentioned solutions.
Here you need to follow two formulas
1. High low method Formula = (Y2-Y1)/(X2-X1)
2. Regression Total value Formula = Y =a+bx
Description of 1st formula and implementation
y2 = Highest range pick of total value , X2= Highest range from respective line
Y1= Lowest range of the above total
There are three total values of three months they are
Month Total labor hours
Jan - 80000.......(Y1) 1000.....(x1)
Feb - 140000 3000
Mar - 200000......(Y2) 5000 (X2)
b(variable cost per labour hour) = (Y2-Y1) / (X2-X1) = (200000-80000) / (5000-1000) = 120000/4000= 30......(1)
The total cost of a product = Y =a+bx, where a= fixed cost, b = variable cost per unit , x= total unit produced
we have the data for total cost, variable units , need to calculate Fixed cost using regression formula
Consider any of the monthly data and convert them into an equation
for instance
Jan --- Tot cost =80000 = Y, Total variable units = labor hours= x = 1000
and we have already derived "b"....eq (1)
Hence the equation can be y = a+bx
80000= a+30*1000
a= 80000-30000=50000.....(Ans)
https://myimanetwork.imanet.org/communities/community-home/digestviewer/viewthread?GroupId=1573&MessageKey=63428178-de1b-49e8-90d4-860e3f4df8fa&CommunityKey=538b6443-38cb-4957-9a03-9d7acca007f1&ReturnUrl=%2fcommunities%2fcommunity-home%2fdigestviewer%3fcommunitykey%3d538b6443-38cb-4957-9a03-9d7acca007f1
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G. Prasad
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Original Message:
Sent: 04-29-2022 11:55 AM
From: Tayba Al-Mehdar
Subject: OVERHEAD ALLOCATION HELP
need help understanding this question.
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Tayba Al-Mehdar
Controller
Khobar
Saudi Arabia
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