Baldr Ltd produces sunscreen. The following information is available: Electricity costs associated with the factory are...
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Baldr Ltd produces sunscreen. The following information is available: Electricity costs associated with the factory are $6,000 per month plus an average of $0.05 per litre. Inspection of invoices from raw material suppliers indicate that the ingredients per litre costs on average $18.50. . . Monthly depreciation on long-term assets total $35,000, of which $30,000 relates to the factory and the remainder relates to selling and distribution functions. Payroll records show engineer and factory supervisor salaries total $46,000 per month. The machines are maintained twice each month. The cost per round of maintenance is $800. Wage records show that wages and on-costs for production employees are $0.20 per litre. Required: 1. Use the account-classification method to express the cost function for estimating the total monthly production cost. (7 marks) 2. Assume that 200,000 litres of sunscreen will be manufactured next month. Predict the production cost for next month. (2 marks) The administrator of Hel Hospital wants a cost formula to forecast the cost of the Admitting Department. The administrator identified the number of patients admitted as the cost driver and extracted data related to the preceding six months. Month August September October November December January Number of Patients Admitted 2,600 2,800 2,500 2,300 2,200 1,900 Admitting Department Costs 21,400 25,000 19,900 20,400 20,800 19,100 The administrator has estimated that the hospital's relevant range of monthly activity in the future will be 2,200 to 2,800 patients. Required: 1. Use the high-low method to express the cost function for estimating Admitting Department costs. The cost function needs to be able to reasonably predict future monthly costs for Hel Hospital. (6 marks) 2. Explain whether you will use this cost function to predict the admitting costs for 2,400 patients. (3 marks) Baldr Ltd produces sunscreen. The following information is available: Electricity costs associated with the factory are $6,000 per month plus an average of $0.05 per litre. Inspection of invoices from raw material suppliers indicate that the ingredients per litre costs on average $18.50. . . Monthly depreciation on long-term assets total $35,000, of which $30,000 relates to the factory and the remainder relates to selling and distribution functions. Payroll records show engineer and factory supervisor salaries total $46,000 per month. The machines are maintained twice each month. The cost per round of maintenance is $800. Wage records show that wages and on-costs for production employees are $0.20 per litre. Required: 1. Use the account-classification method to express the cost function for estimating the total monthly production cost. (7 marks) 2. Assume that 200,000 litres of sunscreen will be manufactured next month. Predict the production cost for next month. (2 marks) The administrator of Hel Hospital wants a cost formula to forecast the cost of the Admitting Department. The administrator identified the number of patients admitted as the cost driver and extracted data related to the preceding six months. Month August September October November December January Number of Patients Admitted 2,600 2,800 2,500 2,300 2,200 1,900 Admitting Department Costs 21,400 25,000 19,900 20,400 20,800 19,100 The administrator has estimated that the hospital's relevant range of monthly activity in the future will be 2,200 to 2,800 patients. Required: 1. Use the high-low method to express the cost function for estimating Admitting Department costs. The cost function needs to be able to reasonably predict future monthly costs for Hel Hospital. (6 marks) 2. Explain whether you will use this cost function to predict the admitting costs for 2,400 patients. (3 marks)
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1 Cost function for estimating total monthly production cost using the accountclassification method a Electricity costs 6000 per month 005 per liter n... View the full answer
Related Book For
Management Accounting
ISBN: 9781760421144
7th Edition
Authors: Kim Langfield Smith, Helen Thorne, David Alan Smith, Ronald W. Hilton
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