Management Accounting: High-Low Method, Cost of Goods Sold, Variance Analysis, Relevant Cost and Opportunity Cost

Management
Accounting

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Question 1....................................................................................................................................3
Question 2....................................................................................................................................5
(i)..................................................................................................................................................5
(ii)................................................................................................................................................6
Question 4....................................................................................................................................6
Question 5....................................................................................................................................9
(a).................................................................................................................................................9
(b)...............................................................................................................................................10
(c)...............................................................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Managerial Accounting is process which includes measuring, interpreting, interpreting,
communicating and identifying the transactions of the management. It further deviates from the
financial accounting which assists in knowing internal information of the company. In the
following report it includes how manager performs account work and opportunity cost. This
accounting helps in growing the business by considering various cost and fixed cost which
includes in the organisation. It is different from the bookkeeping which records financial
transactions of the company and administration accounting of the business concern (Brown and
et.al., 2020).
MAIN BODY
Question 1
With the help of the high-low method, evaluate:
High low method: Cost accounting is a topic which helps in determine the per unit cost of the
product. The high low method of costing helps in knowing the highest level and the lowest level
which will help the management in achieving the goals of the organisation. In this the highest
level of operations is taken and the lowest value of the is considered.
In terms of cost bookkeeping, high and low techniques can be understood as an effort to
separate variable and fixed costs with limited information. The high-low strategy is calculated
including taking the most significant functional motor level and the smallest degree of action,
and further checking in the full cost of completing each level (Cools and Rossing, 2021).
Difference in cost:
Monthly operating cost at 80% occupancy:
550 x 80%= 440 rooms
440 x £32 x 30 days 422,400
Monthly operating cost at 60% occupancy (which is given) 399,300
Difference in cost 23,100
Difference in activity:
80% occupancy (550 x 80% x 30days) 13,200

60% occupancy (550 x 60% x 30days) 9,900
Distinction in activity = 3,300
Change in cost / change in activity = 23,100/3,300 = £7 per room per day
Monthly operating cost at 80% occupancy (above)
Less variable cost:
422,400
440 beds x 30daysx £7 92,400
Fixed operating cost per month 330,000
550 beds x 70%
= 385 beds occupied
(b) The total fixed operating costs per month. (6 marks)
Monthly operating cost at 80% occupancy (above) Less
variable cost:
422,400
440 beds x 30daysx £7 92,400
Fixed operating cost per month 330,000
550 beds x 70%
= 385 beds occupied
2. Assume an occupancy rate of 70% per month. What quantity of total working cost would you
expect the hospital to experience?
Fixed cost 330,000
Variable costs: 385 beds x 30days x £7 80,850
Total expected costs £410,850
3. At an activity level of 6,800 units, Pen Corporation's total variable cost is £125,188 and its
total fixed cost is £164,152. Required for the activity level of 7,100 units, compute:
a) The total variable cost;
 The total fixed cost;
 The total cost;
 The average variable cost per unit;