AC200 TOPIC 3

Question 1

What are mixed costs?

Answer 1

they are cost that has both fixed and variable components.

Question 2

what is the formula for mixed cost?

Answer 2

Y= a +bX
Y= total mixed costs
a= total fixed costs
b= variable cost per unit
X= activity leve

Question 3

what is the high and low method
?

Answer 3

it is a simple technique used in cost accounting to estimate the fixed and variable components of a mixed cost.

Question 4

what are the 5 steps of the high -low method

Answer 4

1- identify data points
2- Identify the high and low points
3- calculate the variable cost component
4- calculate the fixed cost component
5- create the cost equation

Question 5

what is the total cost formula

Answer 5

TC=TFC+TVC

Question 6

what is the formula for total variable cost?

Answer 6

TFC= variable cost per unit * units highest activity

Question 7

what is the contribution format?

Answer 7

Its is an approach that separates costs in fixed and variables categories , first deducting variable expenses from sales to obtain what is know as the contribution margin.

Question 8

why is the contribution format used?

Answer 8

it is useful in appraising product performance, when reporting of profit an in budgeting