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Sir, i have a question on cost behaviour:
The following date relate to the overhead expenditure of contract cleaners at two activity levels:
Square Metre Cleaned: 12,750 15,100
Overheads: $73,950 $83,585
Using the high-low method, what is the estimate of the overhead cost if 16,200 square metres are to be cleaned?
Thank you for your answer and help.
In future, you must ask in the Ask the Tutor Forum if you wish for me to answer. This forum is for students to help each other.
Using high low, the variable cost per sq metre = (83585 – 73950) / (15100 – 12750) = $4.10.
The fixed overhead = 73950 – (12750 x 4.10) = $21,675
Therefore the cost for 16200 sq metres = (16200 x 4.10) + 21675 = $88,095
I do suggest you watch my free lectures on this because I explain high low in detail, with examples. The lectures are a complete free course for Paper F2 and cover everything needed to pass the exam well.
(And why are you attempting questions for which you do not have answers? You should be using a Revision Kit from one of the ACCA approved publishers – they are full of exam standard questions, together with answers and workings!)
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