Exam# 309 stion 1-Chapter 6 Cost Estimation (5 marks-7 minutes) oe following sel

Question

Exam# 309 stion 1-Chapter 6 Cost Estimation (5 marks-7 minutes) oe following selected data was taken from the accounting records of McGil Plumbing Ltd. The company uses kilometres driven as its cost driver for their work van overhead costs. Menth May 2017 June July August 8,100 9.700 8,600 9.800 8,400 9,300 Cost S 2,605 $ 3,005 $ 2,730 $ 3,030 $ 2,680 $ 2,905 September October Required: a) (3 marks) Using the high-low method, analyze the overhead costs and calculate both i) the monthly fixed portion AND ii) the variable cost per unit of the cost driver b) (2 marks) The month of December 2017 is forecasted to total 9,100 kilometres. Present cost behavior pattems are expected to continue into the latter half of this year. Prepare a working paper that details the calculation of all items required to estimate the total amount of overhead for this period Page 4 is on the back of this page (turn over)> Fa 2017

Explanation / Answer

a) Kilometers Cost high 9,800 3,030 low 8,100 2,605 Differecne 1,700 425 Variable cost per unit = 425/1700 0.25 per unit Fixed cost   = 3030 - (9800*.25) 580 b) for 9100 kilometers cost function Y = 580 + 0.25 X total cost =580 + 9100*.25 2855 answer

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