i need a conclustion about this

REQUIRED QUESTION ONE = Sale or Actual Results Cost Function Variance Line Item Units sold Sales Revised Budget 135,000 $1,350,000 0 135.000 $1,350,000 y=S1OX SO S135.000 $270,000 y-$2X Direct materials Direct labor Indirect labor Maintenance Supplies $ 5.000 SI5.000 U 51.500 F $ 2.000 U S SOOF $14), MMS $285,000 $72.000 y $6,000 SO. SOX $ 22,000 $20,000 S 21.00 V-38,000+ 0.1X S 108,000 - RX S53,000 - 50.000 $5.900 y = $3.000+ 0.02X S 80,000 y=$80.000 $ 17.000 y $70.000 0.05X Power S73,500 S 20,000 S 21.500 $ 108,000 S 50,000 $ 5.700 S 80.000 $ 3.000U Heat Light Rent S200U Insurance S 16.750 $250U Supporting workings Finding cost function to determine if there are fixed costs involved and their respective amounts. The formula used was the elimination and substitution i. Supplies $28.000 - 200.000 $15.500 = a +75.000 Using the elimination method, the lower equation will be subtracted from the upper equation to obtain $12.500 - 125.000 b -$12,500/125.000 - 0.1 To find a (fixed costs) $28,000 = a + 200.000 (0.1) a = 528,000 - $20.000 - 58,000 Hence the cost function will be Y - $8,000 + 01x Power ii. S160,000 - a + 200,000x $60,000 -a + 75,000x Using the same elimination and substitution, we will have: S100,000 - 125,000x X = 0,8, hence y=0,8X with no fixed costs. iii. Light $7,000 a + 200,000x $4,500-a+75,000X Using the same elimination and substitution, we will have $2,500 = 125,000x X=0.02, and a = $7,000 - 200,000 x 0.02) which will be $3,000 Hence the cost function will be y = $3,000+ 0.02% = iv. Insurance $20,000 = a + 200,000x $13,750 = 2 + 75,000x Using the same elimination and substitution, we will have 56,250 - 125,000x X-0,05 and a - 520,000 - 200,000 x 0.05) - 510,000. Therefore, y = $10,000+ 0.05X For an easier and more understandable analysis, what needs to be undertaken is to compare the actual results with the reviewed budget using the computed cost functions. The difference between the actual budget and the reviewed budget will the variance which is then indicated as being unfavourable (U) or favourable (F). In terms of costs, the variance will be indicated as unfavourable if the actual costs exceed the reviewed planned budget. However, it will be indicated as favourable if the actual costs are less than the planned cost budget. As for maintenance, heat and rent costs/expenses, it can be seen that their cost functions denotes that the costs are fixed costs and hence do not change by the variations in sales volumes or units. On the other hand, indirect labour, supplies, light and insurance costs can be categorized as mixed costs given that its cost functions contained both fixed and variable costs. Direct materials, direct labour and power are variable costs given that their total costs changes with changes in sales volumes QUESTION TWO The approaches or methods that can be used include High-low method Scatter-graph method iii. Least-squares regression method. i. . Given that overhead costs may include mixed costs, the above three methods can be utilized to estimate the cost function for the overhead costs while using the direct labour hours as the cost drivers. The high-low method will use the one-year available historical data for costs estimates. The first step using this method will be to identify in the 12 months data, the highest and lowest levels of activity in terms of the direct labour hours as the cost driver and the total overhead costs for one of the months. Once we have this details, the next step will be to compute the variable cost per hour for the overhead costs. This will be realized by dividing the change in overhead costs between the highest and lowest activity by the change in direct labours as shown below Change in overhead costs (High - Low) Change in direct labour hours (High-Low) Once the variable cost per hour has been computed, the next step is to calculate the total variable cost which will be done by multiplying the variable cost per hour by the number of direct labour hours in that month. This will allow for the calculation of total fixed cost which will be as follow Total fixed cost = Total cost - Total variable cost Once the fixed costs have been determined, and we already have the variable cost per hour, the cost function can be estimated in the form of. Ya+b X, where a is the Fixed cost, b is the variable cost per hour and the number of direct labour hours As for the Scatter-graph method, the first step will involve plotting the data points for each month of the historical 12 months' data on a graph where the overhead costs will be on the Y- axis while the direct labour-hours on the X-axis. A line can be visualized to see how the data points fit in the line. The third step will be to estimate the total fixed costs (a). To find the fixed costs, this will be the point where the line drawn to fit the data points will touch the Y-axis. This is because the line will touch the Y-axis when the direct labour hours will be zero, hence = the fixed costs. The next fourth step will be to calculate the variable cost per unit. This will be done by taking a data point on the graph where the line intersects and fill in the total overhead costs as Y and direct labour hours as X in the cost function in the form of Y = a +b X. Given that we have fixed costs, we can now compute for the variable cost per labour hour. Now that we have all of the elements of the cost function, we can then be able to estimate the cost function with the data that we have. As for the least-square regression method, the approach can be undertaken in case the scatter- graph signifies a linear relationship between direct labour hours as the cost drivers and the overhead costs. This approach is more accurate given that it utilizes all the of the data points when estimating for both the fixed and variable costs of the overhead costs as mixed costs. Often, this approach is carried with the aid of a computer software. The results will include two key coefficients named as y-intercept which will be the fixed costs and x-variable as the variable cost per hour in our case. The cost function can then be estimated to find the total costs by filling in the direct labour hours for a certain month. REQUIRED QUESTION ONE = Sale or Actual Results Cost Function Variance Line Item Units sold Sales Revised Budget 135,000 $1,350,000 0 135.000 $1,350,000 y=S1OX SO S135.000 $270,000 y-$2X Direct materials Direct labor Indirect labor Maintenance Supplies $ 5.000 SI5.000 U 51.500 F $ 2.000 U S SOOF $14), MMS $285,000 $72.000 y $6,000 SO. SOX $ 22,000 $20,000 S 21.00 V-38,000+ 0.1X S 108,000 - RX S53,000 - 50.000 $5.900 y = $3.000+ 0.02X S 80,000 y=$80.000 $ 17.000 y $70.000 0.05X Power S73,500 S 20,000 S 21.500 $ 108,000 S 50,000 $ 5.700 S 80.000 $ 3.000U Heat Light Rent S200U Insurance S 16.750 $250U Supporting workings Finding cost function to determine if there are fixed costs involved and their respective amounts. The formula used was the elimination and substitution i. Supplies $28.000 - 200.000 $15.500 = a +75.000 Using the elimination method, the lower equation will be subtracted from the upper equation to obtain $12.500 - 125.000 b -$12,500/125.000 - 0.1 To find a (fixed costs) $28,000 = a + 200.000 (0.1) a = 528,000 - $20.000 - 58,000 Hence the cost function will be Y - $8,000 + 01x Power ii. S160,000 - a + 200,000x $60,000 -a + 75,000x Using the same elimination and substitution, we will have: S100,000 - 125,000x X = 0,8, hence y=0,8X with no fixed costs. iii. Light $7,000 a + 200,000x $4,500-a+75,000X Using the same elimination and substitution, we will have $2,500 = 125,000x X=0.02, and a = $7,000 - 200,000 x 0.02) which will be $3,000 Hence the cost function will be y = $3,000+ 0.02% = iv. Insurance $20,000 = a + 200,000x $13,750 = 2 + 75,000x Using the same elimination and substitution, we will have 56,250 - 125,000x X-0,05 and a - 520,000 - 200,000 x 0.05) - 510,000. Therefore, y = $10,000+ 0.05X For an easier and more understandable analysis, what needs to be undertaken is to compare the actual results with the reviewed budget using the computed cost functions. The difference between the actual budget and the reviewed budget will the variance which is then indicated as being unfavourable (U) or favourable (F). In terms of costs, the variance will be indicated as unfavourable if the actual costs exceed the reviewed planned budget. However, it will be indicated as favourable if the actual costs are less than the planned cost budget. As for maintenance, heat and rent costs/expenses, it can be seen that their cost functions denotes that the costs are fixed costs and hence do not change by the variations in sales volumes or units. On the other hand, indirect labour, supplies, light and insurance costs can be categorized as mixed costs given that its cost functions contained both fixed and variable costs. Direct materials, direct labour and power are variable costs given that their total costs changes with changes in sales volumes QUESTION TWO The approaches or methods that can be used include High-low method Scatter-graph method iii. Least-squares regression method. i. . Given that overhead costs may include mixed costs, the above three methods can be utilized to estimate the cost function for the overhead costs while using the direct labour hours as the cost drivers. The high-low method will use the one-year available historical data for costs estimates. The first step using this method will be to identify in the 12 months data, the highest and lowest levels of activity in terms of the direct labour hours as the cost driver and the total overhead costs for one of the months. Once we have this details, the next step will be to compute the variable cost per hour for the overhead costs. This will be realized by dividing the change in overhead costs between the highest and lowest activity by the change in direct labours as shown below Change in overhead costs (High - Low) Change in direct labour hours (High-Low) Once the variable cost per hour has been computed, the next step is to calculate the total variable cost which will be done by multiplying the variable cost per hour by the number of direct labour hours in that month. This will allow for the calculation of total fixed cost which will be as follow Total fixed cost = Total cost - Total variable cost Once the fixed costs have been determined, and we already have the variable cost per hour, the cost function can be estimated in the form of. Ya+b X, where a is the Fixed cost, b is the variable cost per hour and the number of direct labour hours As for the Scatter-graph method, the first step will involve plotting the data points for each month of the historical 12 months' data on a graph where the overhead costs will be on the Y- axis while the direct labour-hours on the X-axis. A line can be visualized to see how the data points fit in the line. The third step will be to estimate the total fixed costs (a). To find the fixed costs, this will be the point where the line drawn to fit the data points will touch the Y-axis. This is because the line will touch the Y-axis when the direct labour hours will be zero, hence = the fixed costs. The next fourth step will be to calculate the variable cost per unit. This will be done by taking a data point on the graph where the line intersects and fill in the total overhead costs as Y and direct labour hours as X in the cost function in the form of Y = a +b X. Given that we have fixed costs, we can now compute for the variable cost per labour hour. Now that we have all of the elements of the cost function, we can then be able to estimate the cost function with the data that we have. As for the least-square regression method, the approach can be undertaken in case the scatter- graph signifies a linear relationship between direct labour hours as the cost drivers and the overhead costs. This approach is more accurate given that it utilizes all the of the data points when estimating for both the fixed and variable costs of the overhead costs as mixed costs. Often, this approach is carried with the aid of a computer software. The results will include two key coefficients named as y-intercept which will be the fixed costs and x-variable as the variable cost per hour in our case. The cost function can then be estimated to find the total costs by filling in the direct labour hours for a certain month