Using The Fixed And Variable Components Of Cafeteria Cost As A Cost?

800 Words 4 Pages
Register to read the introduction… The numbers of meals served each week over the last seven weeks, along with the total costs of operating the cafeteria are given below:

week

meals served

1
2
3
4
5
6
7

1,500
1,600
1,800
1,450
1,200
1,650
1,900

cafeteria costs
(RM)
4,800
5,080
5,280
4,900
4,000
5,100
5,400

Assume that the relevant range includes all of the activity levels mentioned in this problem.
Required:
A. Use the high low method to establish the fixed and variable component of cafeteria costs. (5 marks)

B. Express the fixed and variable components of cafeteria costs as a cost formula in the linear form Y= a + Bx.
(3 marks)

C. Using the cost formula you derived above, what cafeteria costs you would expect to be incurred at the number of meals served are 2000 and 3500.
(6 marks)

D. What is the major limitation of the high-low method?
(6 marks)
[20 marks]

EAB10603_Management Accounting 1

3

CONFIDENTIAL
Question 3

Genesis Wheels manufactures spoked and solid bicycle wheels. The company relies on an activity based costing system. The following information has been provided for the cost pools: cost Pool machine setup assembly / Polish
inspection

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