HA2011 Tutorial Questions On Management Accounting

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Question 1 - Week 2 (8b) (7 marks)

Star Limited, a management consultancy firm, has operating hours fluctuate from week to week. Its utilities costs and operating hours for the past six weeks are as follow:

Week Operating Hours Utilities Cost ($)
1 42 630
2 55 705
3 37 427
4 33 485
5 39 552
6 41 637

 

Required:

  1. Use the high-low method to estimate the cost behaviour for the company’s utilities costs, assuming that variable costs vary in proportion to the hours of operation. Express the cost behaviour in a cost function (Y = a + bX).
  2. Star Limited is expected to be operated for 45 hours in next week. Predict the company’s total utilities cost for the week

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