16. The administrator of Azalea Hills Hospital would like a cost formula linking

Question

16. The administrator of Azalea Hills Hospital would like a cost formula linking the administrative costs involved in admitting patients to the number of patients during a month. the admitting department’s and the number of patients admitted during the immediately preceding eight month are in the following table: N0.of patients admitting Month admitted dept. costs May 1,800 $14,700 June 2,000 $16,400 July 1,700 $13,700 August 1,600 $14,000 September 1,000 $12,400 October 1,300 $13,100 November 1,100 $12,800 December 1,500 $14,600 1. Use the high-low method to estimate the fixed and variable components of admitting costs. 2. Express the fixed and variable components of admitting costs as a formula in the form of y = a +bx. 17. Identify the costs categories blow. In 1st column select whether manufacturing costs or non-manufacturing costs. In 2nd column if manufacturing cost select whether direct material, direct labor, manufacturing overhead if non-manufacturing cost select whether selling or administrative costs. Wood for tables ____________ _ ______________ Assembly-line worker salary_____________ ________________ Factory utilities _____________ ________________ President’s salary ______________ ________________ Assembly-line supervisor salary_____________ ________________ sales person commissions _______________ ________________ rent on executive building _______________ ________________ advertising ______________ ________________ 18.select whether this cost is direct, indirect, sunk or opportunity. Wood for tables _______________________________________ Factory utilities _____________________________________________ Sales person commissions______________________________________ Purchase of equipment 5 years ago______________________________ Rental income forgone on factory space__________________________

Explanation / Answer

High Low Method Variable Cost per unit = Cost at highest units- Cost at Lowest Units/ Highest Units- Lowest Units = 16400-12400/2000-1000 = 4000/1000 = $ 4 per unit Total Variable costs = 1000*4 = $4,000 Fixed Costs= 12400-4000 = $8,400 Formula = y =a+bx Y = 8400+4x Where y = Total Cost x = No of units Woods for Table Manufacturing Cost Direct material Assembly line worker salary Non Manufacturing Cost Administrative cost Presidents cost Non Manufacturing Cost Selling Assemble Line supervisor salary Non Manufacturing Cost Administrative cost Sales Person Commission Non Manufacturing Cost Selling

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