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The cost of a lubricant used for automated machining operations tends to vary with the speed of machine operations, and the machine is converted
The cost of a lubricant used for automated machining operations tends to vary with the speed of machine operations, and the machine is converted into units of product manufactured each hour. Management hopes to be able to establish the fixed portion and the variable portion of the cost. A record of the costs for various units of product manufactured by Kardo Company is given below, for the last ten (10) months of 2017: Machine Hours Used Costs March 600 5,800.00 April 500 5,900.00 May 400 5,500.00 June 850 6,600.00 July 550 5,900.00 August 650 5,900.00 September 450 5,400.00 October 300 5,000.00 November 600 5,900.00 December 400 5,500.00 REQUIRED: 1. Split the semi-variable cost (lubricating oil) into its fixed and variable components using the following techniques. (Carry computations up to five(5) decimal places for the variable component, and to the nearest peso for the fixed component). a. High-low b. Scattergraph c. Method of least squares (compute also the coefficient of correlation and the coefficient of determination) The R Company has annual production of 60,000 units a year. Budgeted operating results for 2020 are as follows: Sales (50,000 units @ P10) P500,000 Variable costs & expenses: Manufacturing (50,000 units @P3.20) P160,000 Selling (50,000 @P0.80) 40,000 200,000 Contribution margin P300,000 Fixed costs & expenses: Manufacturing P100,000 Selling Net income 80,000 180,000 P120,000 A wholesaler from another part of the country wants to buy 5,000 units at a price of P8 per unit. All fixed cost would remain within the relevant range. Variable manufacturing costs would be the same per unit but the variable selling expenses would increase by P2 per unit on the special order only. REQUIRED: 1. Determine whether the company should accept the special order. Use two solutions like Exercise 8-10. 2. Assuming the company wants to maximize profits, if the customer wants the special order to be 20,000 units, should the company reject the special order? Use two solutions also like no. 1.
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