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    428,571.43 Is The Cost of Medicine For August

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    Denise
    The document discusses using the high-low cost method to determine variable and fixed costs from expense data to develop cost functions. It analyzes cost data for accommodation, medicine, and major hospital costs, determining the variable and fixed costs for each using the highest and lowest activity levels. An example calculates that if hospital admissions were 2,000, the total major hospital cost would be 1,200,000.

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    428,571.43 Is The Cost of Medicine For August

    Uploaded by

    Denise
    17 views3 pages
    The document discusses using the high-low cost method to determine variable and fixed costs from expense data to develop cost functions. It analyzes cost data for accommodation, medicine, and major hospital costs, determining the variable and fixed costs for each using the highest and lowest activity levels. An example calculates that if hospital admissions were 2,000, the total major hospital cost would be 1,200,000.

    Original Description:

    High Low Method Accting

    Original Title

    Z2 Cost-HighLow-Hosp

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    The document discusses using the high-low cost method to determine variable and fixed costs from expense data to develop cost functions. It analyzes cost data for accommodation, medicine, and major hospital costs, determining the variable and fixed costs for each using the highest and lowest activity levels. An example calculates that if hospital admissions were 2,000, the total major hospital cost would be 1,200,000.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    17 views3 pages

    428,571.43 Is The Cost of Medicine For August

    Uploaded by

    Denise
    The document discusses using the high-low cost method to determine variable and fixed costs from expense data to develop cost functions. It analyzes cost data for accommodation, medicine, and major hospital costs, determining the variable and fixed costs for each using the highest and lowest activity levels. An example calculates that if hospital admissions were 2,000, the total major hospital cost would be 1,200,000.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    1.

    By using the data of May


    Accommodation Expense is variable 400,000
    Variable Cost per unit is 400,000/1,400 units = 285.7142857 or 285.71

    August:
    Accommodation Expense = 1650 x 285.71 per unit or (400,000/1400) X 1650 units
    471,428.57
    Utilities = 300,000

    1,200,000 – 471,428.57 – 300,000 = 428,571.43

    428,571.43 is the cost of medicine for August

    2. Cost function for medicine


    Y = a + bx
    Where:
    Y = Total cost of medicine
    A = Fixed Cost
    B is the variable cost per unit
    X = activity level

    Determine cost of medicine for lowest activity unit (June)


    800,000 – (400,000/1400 x 1200) – 300,000 = 157,142.86

    VC for Medicine = 178,571.43– 157,142.86


    1300-1200
    VC = 214.29

    178,571.43 = (214.29 X 1300) + Fixed Cost

    Use February Data

    850,000 – 371,428.57 – 300,000 = 178,571.43

    178,571.43 = 214.29X + Fixed Cost


    However, this will yield negative result, this would be a limitation on High-Low Cost Method
    3. Cost function for Major Hospital Cost

    High Low Method

    Find Variable Cost= Cost of Highest Activity – Cost of Lowest Activity


    Highest Hospital Admission – Lowest Hospital Admission

    **NOTE – Outlier is the month of March and July Why? It does not follow the trend; it does not
    represent the costs if you include them

    So ang pinakamataas na activity ay August at Pinakamababa na activity is June.


    Yung Cost na gagamitin ay ang cost ng pinakamataas na activity which is 1,250,000
    At yung cost ng pinakamababa na activity which is 800,000
    Basta ang gamitin sa formula ay ang cost ng pinakamataas at pinakamababang ACTIVITY

    = 1,200,000 – 800,000
    1,650 - 1,200
    = 400,000
    450
    VC= 888.89
    High Low Cost = (Variable Cost x Unit of Activity) + Fixed Cost

    Cost Function
    Y = a + bx
    Fixed Cost is
    1,200,000 = 1,650,000 + FC
    Total Cost = 888.89X + Fixed Cost

    But this will yield negative Fixed Cost???, to properly determine you can plot the data x and y
    axis, x as the number of activity and y as the costs.
    Or you can do trial and error until you will have a yield of positive Fixed Cost.
    Use the next highest activity level until you yield a positive fixed cost.

    Use February Data as the highest activity level

    = 850,000 – 800,000
    1,300 - 1,200
    = 50,000
    100
    VC= 500
    TC = 500X + Fixed Cost
    850,000 = (500 X 1,300) + Fixed Cost
    Fixed Cost = 200,000
    TC = 500X + 200,000 Cost Function for Major Hospital Cost

    4. If Hospital admission is at 2,000?

    Total Cost = (500 X 2,000) + 200,000


    TC = 1,200,000 is the Total Major Hospital Cost

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