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Shum Manufacturing, which uses the high - low method for estimating cost function, makes a product called Kwan. The company incurs three different manufacturing cost
Shum Manufacturing, which uses the highlow method for estimating cost function, makes a product called Kwan. The company incurs three different manufacturing cost types A B and C and has a relevant range of operation between units and units per month. Perunit costs at two different activity levels for each cost type are presented below.
Type A Type B Type C Total
units $ $ $ $
units $ $ $ $
Required:
a Classify each of the costs A B and C as either fixed or variable or semivariable
b Write down a linear cost function that expresses the behavior of Shum's total manufacturing cost as a function of # of units produced.
c If Shum produces units, what would be the total cost of manufacturing?
d If all fixed costs or fixed components of costs decrease by and all variable costs or variable components of costs decrease by what would be the total cost of manufacturing for an activity level of production of units?
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