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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 highlow 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 highlow method to determine the estimating cost function with machine hours as the cost driver.
on b. If June's estimated machinehours 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 .
 Spring '08
 BROWN

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