ACCTG322 Chapter Notes - Chapter 6: List Of Statistical Packages, Earnings Before Interest And Taxes, Microsoft Excel
8 Apr 2014
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Change in cost = ,400 = per job. Total repair cost at high activity level The line intersects the cost axis at about ,250. The variable cost can be estimated as fol- lows: Total cost at 180 jobs (a point that falls on the line) Less the fixed cost element (intersection of the y axis on the graph) Variable cost element at 180 jobs (total) ,750 180 jobs = . 38 per job. Therefore, the cost formula is: y = ,250 + . 38x. Neither of the formulas developed in parts 1 and 2 should be used to predict costs for a. 600-job month because that level of activity appears to be well outside of the relevant range. The next closest activity level is only 260 jobs (may), which is less than half of the number of jobs the manager wants to predict costs for. Both fixed and variable costs could increase if the level of activity is 600 jobs.
