Cost Accounting Accounting, Finance, SPSS Math Problem (Math Problem Sample)

Cost Accounting
1 a). Inventory control
* Economic order quantity
EOQ=2DCH, where Annual demand, D = 480,000 pens, Ordering cost per order, C = sh 1,500, Carrying/holding cost per unit, H = sh 8
EOQ=2×480,000×1,5008= 13,416 pens
* Total cost of EOQ
Price per pen=48024 ×110%= sh 22
Total cost= (purchase price+ ordering cost+ holding costs)
Total Purchase price = sh (22×480,000) = Sh 10,560,000
Ordering costs= 480,00013,416 ×1,500 = sh 53,667
Holding costs = 13,4162 ×8 = sh 53,664
Total costs of EOQ= Sh 10,560,000+53,664+53,664= sh 10,667,328
* Quantity discount
Costs for ordering 72,000 pens
Purchase cost = (480,000×22×90%) = sh 9,504,000
Ordering costs = 480,00072,000 ×1,500 = sh 10,000
Holding cost = 72,0002×8=Ksh. 288,000
Total costs = 9,504,000 + 10,000 + 288,000= sh 9,802,000
Inference
By comparing total costs under EOQ and discount at 10% for 72,000. The management should pick the discount because it will save the company Ksh. 865,331(10,667,328-9,802,000).
b). High low and linear regression
* High-low method
The highest job assignment is 1240 with a cost of sh 110,000 while he lowest job assignment is 280 with a cost of sh 700,000.
High low method=∆ Total Costs ∆Welding job assignments=110,000-700,0001240-280= - 614.58
For a 280 job assignments, the total costs would be 700,000 with –sh614.58 being variable cost per unit.
Therefore, total costs= fixed cost + (variable cost*no. of units)
FC=TC-VC=700,000+172,082.40=872,082.40
Y=Fc+Vc
Y=872,082.40-771,912.48=sh. 100,169.92
ii) Simple linear regression
Simple linear regression
Y=a+bx
Where