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Question G4
(a) The following costs have been extracted from the records of Organic-Soap Enterprise:
Month Activity level Total cost
Pieces RM
January 14,050 540,200
February 14,100 521,500
March 13,880 498,250
April 13,400 510,500
May 12,990 465,350
June 12,550 478,100
Required:
Calculate the fixed costs per month and variable cost per piece using the
High-Low method. (4 marks)
- A manufacturing company is searching for a method that helps to identify
variable cost per unit and fixed cost. In the last meeting, one of the
accountants suggested that High-low method should be considered. The
owner learns that you have completed a cost accounting course recently
and seeks your opinion.
Required:
Identify and discuss the possible challenges that management may face
when such method is implemented. (4 marks)
(Total 8 marks)
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