Quality Candles  Unit 6 Simulation
anniebabe
Registered Posts: 595
Hi Guys
Quality Candles  Unit 6 ECR Simulation
Has Anyone ever done this simulation before? It is in the Osborne Workbook.
I am fortunate to have a copy of the answers for this sim but I am struggling to understand why they are using the High Low Method on Task 11  for packing overhead cost .
Any help is much appreciated.
Quality Candles  Unit 6 ECR Simulation
Has Anyone ever done this simulation before? It is in the Osborne Workbook.
I am fortunate to have a copy of the answers for this sim but I am struggling to understand why they are using the High Low Method on Task 11  for packing overhead cost .
Any help is much appreciated.
0
Comments

Hi Annie,
I haven't got the books, but the high low method is usually used for costs where you have a fixed and variable part and your trying to work out what the variable part and the fixed part is.
If that doesn't help and noone with the books comes along, feel free to post the question and I'm happy to have a look.0 
Thanks Rinske0

high low method
Overhead cost= fixed element + variable element
Eg Light heat and power cost
100 units 200 units
October £400,000 £600,000
therefore we have
100 units > £400,000 cost if we just divide 400,000/100 it gives us £4000 cost per unit
200 units > £600,000 cost if we just divide 600,000/200 it gives us £3000 cost per unit
so as the unit cost is different the above shows that light heat and power is cost that has a fixed element and a variable element
to calculate these
use the formula y = m*x + c where
y is the total cost
m is the variable cost per unit
x is the number of units
c is the fixed cost element
so with the above figures we have
400,000 = 100*m +c
600,000 = 200*m +c
With these two equations you can calculate m and c
m = £2,000
c = £200,000
(check:
100 units * £2,000 + £200,000 = £400,000
200 units * £2,000 + £200,000 = £600,000)
So if when calculating unit costs you get different figures from two different number of units is because the cost has a fixed element and a variable element
Some overhead costs are of this nature: telephone costs (there is a minimum charge + whatever calls you make, energy costs there is a minimum charge + whatever watts are used)
Hope the above helps, but you are more than welcome to post the question and as Rinske said we can help with the actual figures0 
Hi Guys
Quality Candles  Unit 6 ECR Simulation
........................why they are using the High Low Method on Task 11  for packing overhead cost .
Any help is much appreciated.
You will have been given values of expenses at a given activity / production
Exenses consists of Fixed costs, Variable Costs and SemiVariable costs.
FC and VC are easy to work out.
However, for semivariable costs FC will remain the same but VC will change with production activity.
Therefore you have to use HighLow method to work out FC and VC elements in a semivariable costs expenses.0 
ok thanks for your replies, I obviously need to read the questions again more carefully.
Will have another look today.
thanks again.0 
Still struggling with this task 11
I understand that the packing overhead cost is variable so i need to use the high low method. getting 20 pence per case of candles but after that I am not sure what they are doing. and the simulation is quite long to retype and post on here  i am dooomed  lol0 
0

thanks Sandy  thats very useful.0
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