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  • 1.  NEED HELP TO understand this PART 1 - SECTION D

    Posted 04-19-2022 03:39 PM


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    Tayba Al-Mehdar
    Analyst
    Khobar
    Saudi Arabia
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  • 2.  RE: NEED HELP TO understand this PART 1 - SECTION D

    Posted 04-20-2022 03:03 AM
    This method is called high- low method it is very important formula and also very easy to understand, kindly refer your text or just google it , it is very common formula for finding unit variable cost and fixed cost from total overhead

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    Leon George
    Student
    Chennai TN
    India
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    Original Message


  • 3.  RE: NEED HELP TO understand this PART 1 - SECTION D

    Posted 04-20-2022 04:00 AM
    This can solved using the High low method which is used for predicting the cost which is smaller version of Regression analysis.

    In regression analysis we use the equation Y = a+bx. 
     
    Here also we can use the same formula.
    Here Y = The total cost,  a= Constant coefficient which is the fixed cost here , b= Variable cost per unit and  X = the total production units. 

     So  taking any 2 months for calculation. Say for the month of Feb and March. 

    Variable cost per unit = Change in cost / Change in Units. 
                                =  200,000- 140,000/ 5000- 3000= $30.

    Now for finding FC we can use the above equation. 

    200,000 = a + 30* 5000 
    Or a = FC = 200,000 - 150000 = $ 50,000.


    Or Using the High low method equation also you can solve this. 

    First we have to calculate VC per unit as above. 

    So we will get $30 per unit. 

    Now FC = Highest cost  -  (VC * Highest Unit) 

    FC =. 200,000 - ( 30*5000) = $50,000.

    Hope it's clear now. 



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    VIMAL RAJ CHAKKINGAL
    Student
    PALAKKAD
    India
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    Original Message


  • 4.  RE: NEED HELP TO understand this PART 1 - SECTION D

    Posted 04-20-2022 05:19 AM
    Thank you so much for the thorough explanation.

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    Asim Banaweer
    Analyst
    Jeddah
    Saudi Arabia
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    Original Message


  • 5.  RE: NEED HELP TO understand this PART 1 - SECTION D

    Posted 04-20-2022 06:32 AM

    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)



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    G. Prasad
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    Original Message


  • 6.  RE: NEED HELP TO understand this PART 1 - SECTION D

    Posted 04-25-2022 09:09 AM
    Hello Tayba,

    This Question is solved based on Algebra Formulas, First he says that only Variable OH is allocated based on  Direct Labor Hours, so we basically will divide the Cost of the Variable OH by the DLH, but he gave us the MOH as Total and MOH is Combined of Variable Overhead Costs(VOH) & Fixed Overhead Costs (FOH), So we basically make to Formulas with 2 unknowns (V & F), We will consider V is the Variable OH Costs & Y is the Fixed OH Costs, Therefore we will make 2 Functions as below; (MOH=VOH+FOH)
     80,000=1000V + F




    Original Message


  • 7.  RE: NEED HELP TO understand this PART 1 - SECTION D

    Posted 04-25-2022 09:14 AM
    Hello Tayba,

    This Question is solved based on Algebra Formulas, First he says that only Variable OH is allocated based on  Direct Labor Hours, so we basically will divide the Cost of the Variable OH by the DLH, but he gave us the MOH as Total and MOH is Combined of Variable Overhead Costs(VOH) & Fixed Overhead Costs (FOH), So we basically make to Formulas with 2 unknowns (V & F), We will consider V is the Variable OH Costs & Y is the Fixed OH Costs, Therefore we will make 2 Functions as below; (MOH=VOH+FOH)
     80,000=1000V + F
     140,000= 3000V + F
    So in the first Formula we will Consider F = 80,000 - 1000V
    by replacing F in the second Formula, you will get the below;
    140,000=3000V + [80,000-1000V], 140,000 - 80,000 = 2000V , 60,000=2000V
    So the V will Equal 30$
    After that you will replace the the V amount in any Formula as below and you will get the Fixed Overhead;
    80,000=1000 * 30 (V) + F
    F=80,000-30,000
    F=50,000$

    On Mon, 25 Apr 2022 at 15:08, Mahmoud Hamdi <hamdimahmoud54@...> wrote:
    Hello Tayba,

    This Question is solved based on Algebra Formulas, First he says that only Variable OH is allocated based on  Direct Labor Hours, so we basically will divide the Cost of the Variable OH by the DLH, but he gave us the MOH as Total and MOH is Combined of Variable Overhead Costs(VOH) & Fixed Overhead Costs (FOH), So we basically make to Formulas with 2 unknowns (V & F), We will consider V is the Variable OH Costs & Y is the Fixed OH Costs, Therefore we will make 2 Functions as below; (MOH=VOH+FOH)
     80,000=1000V + F




    Original Message


  • 8.  RE: NEED HELP TO understand this PART 1 - SECTION D

    Posted 04-26-2022 01:57 AM
    My number is 7057894081



    Original Message