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

Indicated on the Solution

source..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

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