high low method

This topic contains 7 replies, has 2 voices, and was last updated by Profile photo of John Moffat John Moffat 1 year, 2 months ago.

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  • Profile photo of josy87
    josy87
    Participant

    Please Sir help,

    A B C D

    total cost 214,559 239,970 243,183 259,541

    Output 64,200 79,350 86,170 85,620

    uses high low method to establish a function y=a+bx

    I used high 86,170 but the right answer is with high output 85, 620. I’m confused, I thought we should consider output not cost.


    Profile photo of John Moffat
    John Moffat
    Keymaster

    You are correct – we use the highest and lowest levels of activity (i.e. the output in this case).

    (I hope this is not one of my examples, because if it is then I need to correct it!!)


    Profile photo of josy87
    josy87
    Participant

    BPP


    Profile photo of John Moffat
    John Moffat
    Keymaster

    Well assuming that you have typed it correctly, then they have made a mistake.
    They are not perfect :-)


    Profile photo of josy87
    josy87
    Participant

    You’re right Sir.
    I have another problem.

    Opening inventory X 5000kg $4
    Opening inventory M 3000 units

    we need 3kg of X to make one M. Sales of M 48 000 throughout the year.

    closing inventory X : one month’s worth of production.
    closing inventory M : two month’s worth of sales

    production X 53000 units
    Materials X required for production 159,000kg

    What is the material X purchase budget?


    Profile photo of John Moffat
    John Moffat
    Keymaster

    Please start a new thread when it is a different topic.

    Opening inventory of X is 5000 kg
    Material required for production is 159,000 kg
    Closing inventory is 159,000/12 = 13250 kg.
    So purchases are 158000+13250-5000 kg.
    The cost is $4 per kg.


    Profile photo of josy87
    josy87
    Participant

    Thanks Sir I got the same answer:
    159000+13250-5000=167250.

    but the answer in the book is different that ‘s why i was confused.

    96000/12 + 159000 – 5000 = 162000 kg

    I struggled to get 96000 but it seems like it’s (48000*2 ). I don’t know why!!!

    BPP Budgeting page 199


    Profile photo of John Moffat
    John Moffat
    Keymaster

    It is not correct – either there is a misprint in the question or in the answer.

    I do not have the BPP books.

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