General de Jesus College

COLLEGE OF ACCOUNTANCY AND ACCOUNTING INFORMATION SYSTEM

Unity  Leadership  Excellence

REVIEW ON COST ACCOUNTING AND CONTROL

COST BEHAVIOR ANALYSIS

Problem 1

In November 2018, Tri-State Industrial wanted to calculate its predetermined OH utility rate to use in calendar
year 2019. The company gathered information for the prior ten months’ machine hours and utility costs. During
2018, the company’s normal operating range of activity was between 3,500 and 9,000 machine hours per month.

The following machine hours and utility cost information is available:

Month Machine Hours Utility Cost

January 7,260 2,960
Febriuary 8,850 3,410
March 4,800 1,920
April 9,000 3,500
May 11,000 3,900
June 4,900 1,860
July 4,600 2,180
August 8,900 3,470
September 5,900 2,480
October 5,500 2,310
Required:

1. Determine the appropriate cost formula for utility cost using:

a. High-low method
b. Simple Least Square Regression Analysis

Problem 2

Ibus Instruments Co. developed the following regression equations to indicate costs at various activity levels:

Direct labor = P4 per unit

Materials = P3 per unit
Supervision = P5,000
Power = P300 + P.25 per unit + P.50 per machine hour
Factory supplies = P250 + P.75 per unit
DepreciationCequipment = P1 per machine hour
DepreciationCbuilding = P10,000

During the next period, the company anticipates production of 20,000 units and usage of 3,000 machine hours.

Required: Prepare a schedule of the production costs to be incurred during the next period.

1
Problem 3

La Mia’s Casas builds replicas of residences of famous and infamous people. The company is highly automated,
and the new accountant-owner has decided to use machine hours as the basis for predicting maintenance costs.
The following data are available from the company’s most recent eight months of operations:

Machine Hours Maintenance Costs

4,000 P1,470
7,000 1,200
3,500 1,680
6,000 1,100
3,000 1,960
9,000 880
8,000 1,020
5,500 1,200
Required:

1. Using the high-low method, determine the cost formula for maintenance costs with machine hours as
the basis for estimation.

Problem 4

Tijuana Tile has gathered the following information on its utility cost for the past six months.

Machine Hours Utility Cost

1,300 P940
1,700 1,075
1,250 900
1,800 1,132
1,900 1,160
1,500 990

Required:

1. Using the high-low method, determine the cost formula for utility cost.
2. Prepare a flexible budget with separate variable and fixed categories for utility cost at 1,325, 1,500 and
1,675 machine hours.