PROBLEM 1:An analysis of past janitorial costs indicates that the average janitorial cost is P1.50 per machine hour at an activity level of 40,000 machine hours and P1.20 per machine hour at an activity level of 50,000 machine hours. Assuming that this activity is within the relevant range, what is the total expected janitorial cost if the activity level is 45,000 machine hours?

PROBLEM 2: The Mix Co. uses the high-low method to estimate the cost function. The information for 2012 is provided below:

Machine-hours Labor Costs

Highest observation of cost driver 500 P15,000

Lowest observation of cost driver 220 6,600

What is the total cost for 400 hours?

PROBLEM 3: Chandler Company produces and sells rattan baskets. The number of drifts produced are the corresponding total production costs for six months, which are representatives for the year, are as follows:

Month Units Produced Production Costs

April 500 P 4,000

May 700 8,000

June 900 6,000

July 600 7,500

August 800 8,500

September 550 7,250

Required: Solve for the variable and fixed cost component using:

a.) High- Low Method

b.) Least- Squares Regression

PROBLEM 4:Monica Company's total overhead costs at various levels of activity are presented below:

Month Machine Hours Total Overhead Costs

April 140,000 P198,000

May 120,000 174,000

June 160,000 222,000

July 180,000 246,000

Assume that the total overhead costs above consist of utilities, supervisory salaries, and maintenance. The breakdown of these costs at the 120,000 machine-hour level of activity is:

Utilities (V) P 48,000

Supervisory salaries (F) 21,000

Maintenance (M) 105,000

Total overhead costs P 174,000

V= variable; F = fixed; M = mixed

Monica Company's management wants to break down the maintenance cost into its basic variable and fixed cost elements.

Required:

1. As shown above, overhead costs in July amounted to P246,000. Determine how much of this consisted of maintenance cost.
2. By means of the high-low method, estimate a cost formula for maintenance.
3. Express the company's total overhead costs in the linear equation form Y = a + bX.
4. What total overhead costs would you expect to be incurred at an operating activity level of 150,000 machine-hours?