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Unformatted text preview: urs for a total cost of $57,600. In July, a peak month, the freezer ran for 720 hours for a total cost of $82,080. Storage ran its Required: freezer in February, a. What is the cost estimating equation for the department if hours of freezer use are used as the cost driver? a slow month, b. What is the estimated total cost at an operating level of 500 hours? Answer: a. Slope(variable costs) = ($82,080 $57,600) / (720 360) = $68 Constant (fixed cost) = $82,080 - (720 × $68) = $33,120 Estimating equation = $33,120 + $68DLH b. Total costs of 500 hours = $33,120 + $68 × 500 = $67,120 Diff: 2 Terms: cost estimation, cost function, cost predictions Objective: 4 AACSB: Analytical skills 165) The of Output 30,000 Units 42,000 Units Wildcat Direct materials $ 180,000 $ 252,000 Company Workers' wages 1,080,000 1,512,000 has Supervisors' salaries 312,000 312,000 provided Equipment depreciation 151,200 151,200 the Maintenance 81,600 110,400 following Utilities 384,000 528,000 informati Total $2,188,800 $2,865,600 on: Using the high-low method and the information provided above, Units a. identify the linear cost function equation and b. estimate the total cost at 36,000 units of output. Answer: a. Variable cost = ($2,865,600 $2,188,800) / (42,000 - 30,000) = $56.40 Fixed cost = $2,865,600 - $56.40 × 42,000 = $496,800 Cost function is y = $496,800 + $56.40X b. Output level of 36,000 units = $496,800 + $56.40 × 36,000 = = $2,527,200 total cost Diff: 2 Terms: linear cost function Objective: 4 AACSB: Analytical skills 166) As part of concerning the operations of the Machining Department: his job as cost Observation Machine -hours Total Operating Costs analyst, January 4,000 $45,000 Max February 4,600 49,500 Thompso March 3,800 45,750 n April 4,400 48,000 collected May 4,500 49,800 the following Required: informati a. Use the high-low method to determine the estimating cost function with machine -hours as the cost driver. on b. If June's estimated machine-hours total 4,200, what are the total e...
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This note was uploaded on 12/12/2012 for the course SB 305 taught by Professor Brown during the Spring '08 term at Clarkson University .

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