MBA

Assignment

The Roasted Chicken House Restaurant has provided you with the following information on its costs at
various levels of monthly sales.

Monthly sales units 400 800 1,200

Cost of food 9,000 10,000 17,000
Supplies 400 800 1,200
Other operating costs 2,000 4,000 6,000
Utilities 500 900 1300
Building rent 2,000 2,000 2,000
Depreciation 200 200 200
Total cost 14,100 17,900 27,700

Required

1. Draw scatter graph for each cost items and explain cost behaviour.
2. Identify each cost as variable, fixed or semi-variable (mixed) cost with reasons.
3. Segregate semi-variable cost, if any, using high-low method and develops an equation for each
cost items.
4. Segregate semi-variable cost, if any, using least square method and develops an equation for
each cost items.
5. Predict total cost for monthly budgeted outputs for 1,000 units as per results of (3) above.
6. Predict total cost for monthly budgeted outputs for 1,000 units as per results of (4) above.
7. Compare results of above (5) and (6), and draw conclusion about reliability of these two results
with valid reasons.