Ali Papa produces toy robot dogs in a highly automated assembly plant in Semenyih. The automated...
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Ali Papa produces toy robot dogs in a highly automated assembly plant in Semenyih. The automated system is in its first year of operation and management is still unsure of the best way to estimate the overhead costs of operations for budgetary purposes. For the first six months of operations, the following data were collected: Machine-hours Kilowatt-hours January February March April May June Required: 3,800 3,650 3,900 3,300 3,250 3,100 4,520,000 4,340,000 4,500,000 4,290,000 4,200,000 4,120,000 Total Overhead Costs (RM) 338,000 336,800 339,200 336,800 326,000 320,000 (a) Determine the cost function with machine-hours as the cost driver using the high-low method. [6 marks] (b) Determine the cost function with kilowatt-hours as the cost driver using the high-low method. [6 marks] (c) For July, the company ran the machines for 3,000 hours and used 4,000,000 kilowatt- hours of power. The overhead costs totaled RM314,000. Identify which cost driver was the best predictor for July. [6 marks] (d) Describe the six (6) steps in estimating a cost function under quantitative analysis. [12 marks] Ali Papa produces toy robot dogs in a highly automated assembly plant in Semenyih. The automated system is in its first year of operation and management is still unsure of the best way to estimate the overhead costs of operations for budgetary purposes. For the first six months of operations, the following data were collected: Machine-hours Kilowatt-hours January February March April May June Required: 3,800 3,650 3,900 3,300 3,250 3,100 4,520,000 4,340,000 4,500,000 4,290,000 4,200,000 4,120,000 Total Overhead Costs (RM) 338,000 336,800 339,200 336,800 326,000 320,000 (a) Determine the cost function with machine-hours as the cost driver using the high-low method. [6 marks] (b) Determine the cost function with kilowatt-hours as the cost driver using the high-low method. [6 marks] (c) For July, the company ran the machines for 3,000 hours and used 4,000,000 kilowatt- hours of power. The overhead costs totaled RM314,000. Identify which cost driver was the best predictor for July. [6 marks] (d) Describe the six (6) steps in estimating a cost function under quantitative analysis. [12 marks]
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Valuation The Art and Science of Corporate Investment Decisions
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