Operations Management

Question 1

high-low method

• what is the formula
• how to calc VC and FC

Answer 1

variable cost = (highest activity cost - lowest act cost)/(highest act units - lowest act units)

FC = highest activity cost - (variable cost * highest activity units)

Question 2

correlation coeficient

Answer 2

the strength in the relationship

will range b/t -1 and 1 (closest the number is to 1 = higher the relationship)

Question 3

BE point formulas

Answer 3

two methods:

1) selling price * X = VC*X + total fixed costs
* * X = units sold at breakeven point

2) total fixed costs / CM
* * CM = sales minus variable costs