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HI5017 Managerial Accounting: High Low Method


•    All questions must be answered by using the answer boxes provided in this paper.
•    Completed answers must be submitted to Blackboard by the published due date and time Submission instructions are at the end of this paper.

This assessment consists of six (6) questions and is designed to assess your level of knowledge of the key topics covered in this unit        

Holmes has been implementing as a pilot program using a revised/adapted Harvard approach to referencing. The following guidelines apply:
•    Reference sources in assignments are limited to sources which provide full text access to the source’s content for lecturers and markers.
•    The Reference list should be located on a separate page at the end of the essay and titled: References. 
•    It should include the details of all the in-text citations, arranged alphabetically A-Z by author surname.  In 

•    All assignments will require additional in-text reference details, which will consist of the surname of the author/authors or name of the authoring body, year of publication, page number of content, paragraph where the content can be found.

Non-Adherence to Referencing Guidelines
Where students do not follow the above guidelines:
1.    Students who submit assignments which do not comply with the referencing guidelines will receive a 10% penalty.  
2.    Students who submit assignments in which the citations are “fake” will be reported for academic misconduct.

Asco Company has a relevant range of production between 15,000 and 30,000 units. The following cost data represents average variable costs per unit for 25,000 units of production.    


a) If 25,000 units are produced, what is the variable cost per unit? (1 mark)
b) If 16,000 units are produced, what is the variable cost per unit? (0.5 mark)
c) Comment briefly on your answers to (a) and (b). (1 mark)
d) If 18,000 units are produced, what are the total variable costs? (1 mark)

GEM Ltd leases a photocopy machine with terms that include a fixed fee each month plus a charge for each photocopy made. GEM made 5,000 copies and paid a total of $600 in January. In April, they paid $400 for 3,000 copies. 

a) What is the variable cost per copy if GEM uses the high-low method to analyze costs? (1.5 marks)
b) How much would GEM Ltd pay if it made 7,500 copies? (Hint: Need to solve for Fixed cost) (2 marks)

Henry’s Kitchens makes two types of sandwich makers: Basic and Deluxe. The company expects to manufacture 70,000 units of Basic, which has a per-unit direct material cost of $10 and a per-unit direct labor cost of $60. It also expects to manufacture 30,000 units of Deluxe, which has a per-unit material cost of $15 and a per-unit direct labor cost of $40. It is estimated that Basic will use 140,000 machine hours and Deluxe will require 60,000 machine hours. Historically, the company has used the traditional overhead allocation method and applied overhead at a rate of $21 per machine hour. It was determined that there were three cost pools, and the overhead for each cost pool is shown:

Machine setups    $  90 000
Machine processing      4 000 000
Material requisitions      100 000
Total overhead    $ 4 190 000

The cost driver for each cost pool and its expected activity is shown:

    Basic    Deluxe    Total
Machine setups    100    200    300
Machine hours    140 000    60 000    200 000
Parts requisitions    80    120    200

a) What is the per-unit cost for each product under the traditional overhead allocation method? (3 marks)
b) What is the per-unit cost for each product under ABC costing? (4 marks)
c) Briefly comment on the overhead applied per unit under the two overhead allocation methods. i.e. How much was overhead under or overapplied for each product? Further, would you recommend a change to ABC costing for Henry’s Kitchens? Why or why not? (4 marks)

Relevant data from Picta Company’s operating budgets are presented below. The company’s financial year ends on 30 June.
    Quarter 1    Quarter 2
Sales    $248,470    $251,539
Direct material purchases    120,295    128,832
Direct labor    76,553    74,289
Manufacturing overhead    26,000    24,400
Selling and administration expenses    33,500    33,500
Depreciation included in selling and administration expenses    
Collection from customers    230,524    220,116
Cash payments for purchases    114,345    118,346

Additional data: 
Equipment was sold in July for $8,000 and $4,500 in November. Dividends of $5,500 were paid in August. The beginning cash balance was $80,395 and a required minimum cash balance per quarter is $60,000.


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