[Batman0714]

I have been assigned a homework problem in Managerial Accounting but I missed the class period where she explained everything. I looked at her online notes and I'm still confused. I read through the book and I understand what y=mx+b is but I'm not sure how to apply it to this problem.

The problem asks me to develop a cost formula for the operating expenses...

Does that mean I make y = the total operating expenses?
I already figured out the quantity which equals x... I think.
The thing is that the operating expenses given are mixed costs but I'm not sure how to figure out the variable.

I'm just completely confused on the problem :(
If anyone can help me that would be great.

Thank you

[ArcSine]

You're on the right track. In a situation where total costs are a linear function of output, then applying the classic linear function

y = mx + b

then y denotes total cost, x is the production in units (both of which you're correct on), m denotes the unit variable cost, and b represents the company's total fixed cost.

A lot of times you'll see the total cost formula given with more intuitive symbols...

C = vQ + F

... same thing. You'll need to analyze your mixed costs to determine what portion varies with production, and what portion remains constant regardless of output. The former should be included in m or v, while the latter is included in b or F.

Real simple example: Suppose my raw materials and other variable inputs amount to $4.50 per unit, while my overhead salaries, building rent, and other fixed costs are $52,000 per month, then my cost formula or model for total costs each month is given by

C = 4.5Q + 52,000

Give that a spin and see how it turns out.