Khan Sunil Enterprises, a software engineering firm, uses the account analysis approach to identify the cost behavior of production costs for its premium software. The following details relate to the company’s activities for June 2019 in which it produced 350 units.

Required

1. Describe the production cost in the equation form y = a + bX
2. Assume the company intends to produce 400 units next month, calculate the total production costs for the month.
3. Comment on the usefulness of the estimation to management of the company

Transcribed Image Text:

Materials used in production Labor costs Production facility costs Total production cost Total *270,000 *134,000 103,000 *507,000 Variable *270,000 *130,000 *100,000 *500,000 Fixed 10,000 ₹4,000 ₹3,000 17,000