1.2 Bunny Ltd manufactures a single product. Its Statement of Profit & Loss for the two...

1.2
Bunny Ltd manufactures a single product. Its Statement of Profit & Loss for the two years are given below:
2019 2018 Units sold 300 000 units 240 000 units Sales revenue N$ 1 500 000 N$ 1 200 000 Cost of goods sold N$ 800 000 N$ 740 000 Gross margin N$ 700 000 N$ 460 000 Less: Operating expenses N$ (450 000) N$ (420 000) Net Income N$ 250 000 N$ 40 000 The Company’s cost of goods sold and operating expenses are mixed costs.
REQUIRED: MARKS
1.2
Using the High-Low Method, separate the cost of goods sold and operating expenses into their variable and fixed elements, and accordingly determine the cost estimation formula for each type of cost. 10 TOTAL MARKS FOR QUESTION 1 25 1.2
Bunny Ltd manufactures a single product. Its Statement of Profit & Loss for the two years are given below:
2019 2018 Units sold 300 000 units 240 000 units Sales revenue N$ 1 500 000 N$ 1 200 000 Cost of goods sold N$ 800 000 N$ 740 000 Gross margin N$ 700 000 N$ 460 000 Less: Operating expenses N$ (450 000) N$ (420 000) Net Income N$ 250 000 N$ 40 000 The Company’s cost of goods sold and operating expenses are mixed costs.
REQUIRED: MARKS
1.2
Using the High-Low Method, separate the cost of goods sold and operating expenses into their variable and fixed elements, and accordingly determine the cost estimation formula for each type of cost. 10 TOTAL MARKS FOR QUESTION 1 25 1.2
Bunny Ltd manufactures a single product. Its Statement of Profit & Loss for the two years are given below:
2019 2018 Units sold 300 000 units 240 000 units Sales revenue N$ 1 500 000 N$ 1 200 000 Cost of goods sold N$ 800 000 N$ 740 000 Gross margin N$ 700 000 N$ 460 000 Less: Operating expenses N$ (450 000) N$ (420 000) Net Income N$ 250 000 N$ 40 000 The Company’s cost of goods sold and operating expenses are mixed costs.
REQUIRED: MARKS
1.2
Using the High-Low Method, separate the cost of goods sold and operating expenses into their variable and fixed elements, and accordingly determine the cost estimation formula for each type of cost. 10 TOTAL MARKS FOR QUESTION 1 25 1.2
Bunny Ltd manufactures a single product. Its Statement of Profit & Loss for the two years are given below:
2019 2018 Units sold 300 000 units 240 000 units Sales revenue N$ 1 500 000 N$ 1 200 000 Cost of goods sold N$ 800 000 N$ 740 000 Gross margin N$ 700 000 N$ 460 000 Less: Operating expenses N$ (450 000) N$ (420 000) Net Income N$ 250 000 N$ 40 000 The Company’s cost of goods sold and operating expenses are mixed costs.
REQUIRED: MARKS
1.2
Using the High-Low Method, separate the cost of goods sold and operating expenses into their variable and fixed elements, and accordingly determine the cost estimation formula for each type of cost. 10 TOTAL MARKS FOR QUESTION 1 25 1.2
Bunny Ltd manufactures a single product. Its Statement of Profit & Loss for the two years are given below:
2019 2018 Units sold 300 000 units 240 000 units Sales revenue N$ 1 500 000 N$ 1 200 000 Cost of goods sold N$ 800 000 N$ 740 000 Gross margin N$ 700 000 N$ 460 000 Less: Operating expenses N$ (450 000) N$ (420 000) Net Income N$ 250 000 N$ 40 000 The Company’s cost of goods sold and operating expenses are mixed costs.
REQUIRED: MARKS
1.2
Using the High-Low Method, separate the cost of goods sold and operating expenses into their variable and fixed elements, and accordingly determine the cost estimation formula for each type of cost. 10 TOTAL MARKS FOR QUESTION 1 25 1.2
Bunny Ltd manufactures a single product. Its Statement of Profit & Loss for the two years are given below:
2019 2018 Units sold 300 000 units 240 000 units Sales revenue N$ 1 500 000 N$ 1 200 000 Cost of goods sold N$ 800 000 N$ 740 000 Gross margin N$ 700 000 N$ 460 000 Less: Operating expenses N$ (450 000) N$ (420 000) Net Income N$ 250 000 N$ 40 000 The Company’s cost of goods sold and operating expenses are mixed costs.
REQUIRED: MARKS
1.2
Using the High-Low Method, separate the cost of goods sold and operating expenses into their variable and fixed elements, and accordingly determine the cost estimation formula for each type of cost. 10 TOTAL MARKS FOR QUESTION 1 25 1.2
Bunny Ltd manufactures a single product. Its Statement of Profit & Loss for the two years are given below:
2019 2018 Units sold 300 000 units 240 000 units Sales revenue N$ 1 500 000 N$ 1 200 000 Cost of goods sold N$ 800 000 N$ 740 000 Gross margin N$ 700 000 N$ 460 000 Less: Operating expenses N$ (450 000) N$ (420 000) Net Income N$ 250 000 N$ 40 000 The Company’s cost of goods sold and operating expenses are mixed costs.
REQUIRED: MARKS
1.2
Using the High-Low Method, separate the cost of goods sold and operating expenses into their variable and fixed elements, and accordingly determine the cost estimation formula for each type of cost. 10 TOTAL MARKS FOR QUESTION 1 25 1.2
Bunny Ltd manufactures a single product. Its Statement of Profit & Loss for the two years are given below:
2019 2018 Units sold 300 000 units 240 000 units Sales revenue N$ 1 500 000 N$ 1 200 000 Cost of goods sold N$ 800 000 N$ 740 000 Gross margin N$ 700 000 N$ 460 000 Less: Operating expenses N$ (450 000) N$ (420 000) Net Income N$ 250 000 N$ 40 000 The Company’s cost of goods sold and operating expenses are mixed costs.
REQUIRED: MARKS
1.2
Using the High-Low Method, separate the cost of goods sold and operating expenses into their variable and fixed elements, and accordingly determine the cost estimation formula for each type of cost. 10 TOTAL MARKS FOR QUESTION 1 25 1.2
Bunny Ltd manufactures a single product. Its Statement of Profit & Loss for the two years are given below:
2019 2018 Units sold 300 000 units 240 000 units Sales revenue N$ 1 500 000 N$ 1 200 000 Cost of goods sold N$ 800 000 N$ 740 000 Gross margin N$ 700 000 N$ 460 000 Less: Operating expenses N$ (450 000) N$ (420 000) Net Income N$ 250 000 N$ 40 000 The Company’s cost of goods sold and operating expenses are mixed costs.
REQUIRED: MARKS
1.2
Using the High-Low Method, separate the cost of goods sold and operating expenses into their variable and fixed elements, and accordingly determine the cost estimation formula for each type of cost. 10 TOTAL MARKS FOR QUESTION 1 25 1.2
Bunny Ltd manufactures a single product. Its Statement of Profit & Loss for the two years are given below:
2019 2018 Units sold 300 000 units 240 000 units Sales revenue N$ 1 500 000 N$ 1 200 000 Cost of goods sold N$ 800 000 N$ 740 000 Gross margin N$ 700 000 N$ 460 000 Less: Operating expenses N$ (450 000) N$ (420 000) Net Income N$ 250 000 N$ 40 000 The Company’s cost of goods sold and operating expenses are mixed costs.
REQUIRED: MARKS
1.2
Using the High-Low Method, separate the cost of goods sold and operating expenses into their variable and fixed elements, and accordingly determine the cost estimation formula for each type of cost. 10 TOTAL MARKS FOR QUESTION 1 25 1.2
Bunny Ltd manufactures a single product. Its Statement of Profit & Loss for the two years are given below:
2019 2018 Units sold 300 000 units 240 000 units Sales revenue N$ 1 500 000 N$ 1 200 000 Cost of goods sold N$ 800 000 N$ 740 000 Gross margin N$ 700 000 N$ 460 000 Less: Operating expenses N$ (450 000) N$ (420 000) Net Income N$ 250 000 N$ 40 000 The Company’s cost of goods sold and operating expenses are mixed costs.
REQUIRED: MARKS
1.2
Using the High-Low Method, separate the cost of goods sold and operating expenses into their variable and fixed elements, and accordingly determine the cost estimation formula for each type of cost. 10 TOTAL MARKS FOR QUESTION 1 25 1.2
Bunny Ltd manufactures a single product. Its Statement of Profit & Loss for the two years are given below:
2019 2018 Units sold 300 000 units 240 000 units Sales revenue N$ 1 500 000 N$ 1 200 000 Cost of goods sold N$ 800 000 N$ 740 000 Gross margin N$ 700 000 N$ 460 000 Less: Operating expenses N$ (450 000) N$ (420 000) Net Income N$ 250 000 N$ 40 000 The Company’s cost of goods sold and operating expenses are mixed costs.
REQUIRED: MARKS
1.2
Using the High-Low Method, separate the cost of goods sold and operating expenses into their variable and fixed elements, and accordingly determine the cost estimation formula for each type of cost. 10 TOTAL MARKS FOR QUESTION 1 25 1.2
Bunny Ltd manufactures a single product. Its Statement of Profit & Loss for the two years are given below:
2019 2018 Units sold 300 000 units 240 000 units Sales revenue N$ 1 500 000 N$ 1 200 000 Cost of goods sold N$ 800 000 N$ 740 000 Gross margin N$ 700 000 N$ 460 000 Less: Operating expenses N$ (450 000) N$ (420 000) Net Income N$ 250 000 N$ 40 000 The Company’s cost of goods sold and operating expenses are mixed costs.
REQUIRED: MARKS
1.2
Using the High-Low Method, separate the cost of goods sold and operating expenses into their variable and fixed elements, and accordingly determine the cost estimation formula for each type of cost. 10 TOTAL MARKS FOR QUESTION 1 25 1.2
Bunny Ltd manufactures a single product. Its Statement of Profit & Loss for the two years are given below:
2019 2018 Units sold 300 000 units 240 000 units Sales revenue N$ 1 500 000 N$ 1 200 000 Cost of goods sold N$ 800 000 N$ 740 000 Gross margin N$ 700 000 N$ 460 000 Less: Operating expenses N$ (450 000) N$ (420 000) Net Income N$ 250 000 N$ 40 000 The Company’s cost of goods sold and operating expenses are mixed costs.
REQUIRED: MARKS
1.2
Using the High-Low Method, separate the cost of goods sold and operating expenses into their variable and fixed elements, and accordingly determine the cost estimation formula for each type of cost. 10 TOTAL MARKS FOR QUESTION 1 25

Expert Solution

All working forms part of the answer
The same question has been posted numerous times.
All answers are at the bottom, after the workings.
HIGH LOW Method working for Cost of Goods Sold

		Units	Cost
High Level		300,000	$ 800,000.00
Low Level		240,000	$ 740,000.00
Difference		60,000	$ 60,000.00

A	Difference in Cost		$ 60,000.00
B	Difference in units		60,000
C = A/B	Variable cost per unit		$ 1.00

Working		High Level	Low Level
A	Total Cost	$ 800,000.00	$ 740,000.00
B	Total Units	300000	240000
C	Variable cost per unit	$ 1.00	$ 1.00
D = B x C	Total Variable cost	$ 300,000.00	$ 240,000.00
E = A - D	Total Fixed Cost	$ 500,000.00	$ 500,000.00

HIGH LOW Method working for Operating Expenses

	Months	Units	Cost
High Level		300,000	$ 450,000.00
Low Level		240,000	$ 420,000.00
Difference		60,000	$ 30,000.00

A	Difference in Cost		$ 30,000.00
B	Difference in units		60,000
C = A/B	Variable cost per unit		$ 0.50

Working		High Level	Low Level
A	Total Cost	$ 450,000.00	$ 420,000.00
B	Total Units	300000	240000
C	Variable cost per unit	$ 0.50	$ 0.50
D = B x C	Total Variable cost	$ 150,000.00	$ 120,000.00
E = A - D	Total Fixed Cost	$ 300,000.00	$ 300,000.00

Answers

	Variable Cost		Fixed Cost	Cost Equation
Cost of Goods Sold	$1.00	per unit	$500,000	= $ 500000 + ($ 1 x Units sold)
Operating Expenses	$0.50	per unit	$300,000	= $ 300000 + ($ 0.50 x Units sold)

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