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# (See attached file for full problem description) --- 1. Find monthly fixed maintenance cost and the variable maintenance cost per driver unit using

(See attached file for full problem description)
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1. Find monthly fixed maintenance cost and the variable maintenance cost per driver unit using the visual-fit method based on each potential cost driver. Explain how you treated the April data.
2. Find monthly fixed maintenance cost of the variable maintenance cost per driver unit using the high-low method based on each potential cost driver.
3. Which cost driver best meets the criteria for choosing cost functions? Explain.

Peoria Implements Company produces farm implements. Peoria is in the
process of measuring its manufacturing costs and is particularly
interested in the costs of the manufacturing maintenance activity, since
maintenance is a significant mixed cost. Activity analysis indicates
that maintenance activity consists primarily of maintenance labor
setting up machines using certain supplies. A setup consists of
preparing the necessary machines for a particular production run of a
product. During setup, machines must still be running, which consumes
energy. Thus the costs associated with maintenance include labor,
supplies, and energy. Unfortunately, Peoria's cost accounting system
does not trace these costs to maintenance activity separately. Peoria
employs two full-time maintenance mechanics to perform maintenance. The
annual salary of a maintenance mechanic is \$25,000 and is considered a
fixed cost. Two plausible cost drivers have been suggested: units
produced and number of setups.
Data had been collected for the past 12 months and a plot made for the
cost driver - units of production. The maintenance cost figures
collected include estimates for labor, supplies, and energy. Cory
Fielder, Controller at Peoria, recently attended an activity-based
costing seminar where he learned that some types of activities are
performed each time a batch of goods is processed rather than each time
a unit is produced. Based on this concept, he has gathered data on the
number of steps performed over the past 12 months. The plots of monthly
maintenance costs versus the two potential cost drivers follow.
Find monthly fixed maintenance cost and the variable maintenance cost
per driver unit using the visual-fit method based on each potential cost
driver. Explain how you treated the April data.
Find monthly fixed maintenance cost of the variable maintenance cost per
driver unit using the high-low method based on each potential cost
driver.
Which cost driver best meets the criteria for choosing cost functions?
Explain.
1-3 pages

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