Using the highest and lowest levels of activity for the past year, the cost function representing maintenance costs (y) as a function of machine hours (x) was developed: y=439,000 + 14x. The lowest level of machine hours last year was 4000. The maintenance cost incurred at the highest and lowest level of machine hours were P551,000 and P495,000, respectively. What was the highest level of activity last year that was used to develop the cost function? a. 14,000 b. 8,000 c. 10,000 d. 12,000
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Using the highest and lowest levels of activity for the past year, the cost function representing maintenance costs (y) as a function of machine hours (x) was developed: y=439,000 + 14x. The lowest level of machine hours last year was 4000. The maintenance cost incurred at the highest and lowest level of machine hours were P551,000 and P495,000, respectively. What was the highest level of activity last year that was used to develop the cost function?
a. 14,000
b. 8,000
c. 10,000
d. 12,000
Step by step
Solved in 2 steps