What is the correct formula for determining total cost?

Steps to Solve

1. Identify Variables Begin by understanding the variables in the formulas:

   • $EPC$: Expected total cost
   • $EP$: Estimated price
   • $APC$: Actual price cost
   • $Y%$: Yield percentage
   • $UNIT$: Represents unit quantities

2. Analyze Each Formula Evaluate each provided formula to see which best fits the principle of calculating total costs.

   • Option 1: $$ \left( \frac{EPC}{EP} \times APC \right) \div Y% $$ This implies adjusting the actual cost based on the expected to price ratio and then dividing by yield, which is not standard.

   • Option 2: $$ \frac{EPC}{UNIT} \times EP $$ This suggests calculating cost per unit times the estimated price, which sounds reasonable for total cost determination.

   • Option 3: $$ \frac{APC}{UNIT} \times Y% $$ This calculates the actual cost per unit adjusted by yield percentage, which does not relate effectively to total cost.

   • Option 4: All formulas given are incorrect. This should be assessed after evaluating the previous options.

   • Option 5: $$ \frac{APC}{Y%} \times EP $$ Here, it suggests correcting the actual cost with yield and then multiplying by estimated price, which does not directly link to total costs.

3. Select the Most Appropriate Formula Based on the analysis, check which formula aligns with standard cost accounting principles.

   The second option seems the most valid, as it appropriately looks at expected costs per unit with the estimated price factor.