high low method

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    josy87
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    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.


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    John Moffat
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    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!!)


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    josy87
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    BPP


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


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    josy87
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    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?


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    John Moffat
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    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.


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    josy87
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    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


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    John Moffat
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    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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