QUIZ AA025 ACCOUNTING 2
TOPIC 6 : COST BEHAVIOR
QUESTION (12 MARKS)
Meow Company
manufactures and sells cat food products. Monthly income statements for two
activity levels are provided below:
|
Product 1
|
Product 2
|
Number of units
|
20,000
unit
|
30,000
unit
|
|
RM
|
RM
|
Revenue
|
150,000
|
225,000
|
Cost of goods sold
|
60,000
|
90,000
|
Gross margin
|
90,000
|
135,000
|
Salaries and commissions
|
20,000
|
25,000
|
Advertising expenses
|
30,000
|
30,000
|
Administrative expenses
|
12,500
|
12,500
|
Total operating expenses
|
62,500
|
67,500
|
Operating Income
|
27,500
|
67,500
|
REQUIRED:
a) Identify the variables costs, fixed cost and
mixed costs.
b) Use the high-low method to separate the total costs in this company (overall) into variable and fixed components.
c) Develop a cost function to express the cost
behavior of Meow Company.
d) Determine the total costs if the company
produces 10,000 and 40,000 unit of cat food products.
ANSWER