Question G4

(a) The following costs have been extracted from the records of Organic-Soap Enterprise:

Month Activity level Total cost

Pieces RM

January 14,050 540,200

February 14,100 521,500

March 13,880 498,250

April 13,400 510,500

May 12,990 465,350

June 12,550 478,100

Required:

Calculate the fixed costs per month and variable cost per piece using the

High-Low method. (4 marks)

2. A manufacturing company is searching for a method that helps to identify

variable cost per unit and fixed cost. In the last meeting, one of the

accountants suggested that High-low method should be considered. The

owner learns that you have completed a cost accounting course recently

and seeks your opinion.

Required:

Identify and discuss the possible challenges that management may face

when such method is implemented. (4 marks)

(Total 8 marks)