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Question

Problem 5-1A

The controller of Rather Production has collected the following monthly

expense data for analyzing the cost behavior of electricity costs.


Total

Electricity CostsTotal

Machine HoursJanuary$2,500300February3,000350March3,600500April4,500690May3,200400June4,900700July4,100650August3,800520September5,100680October4,200630November3,300350December5,860720

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Determine the fixed- and variable-cost components using the high-low method.


Fixed-costs$-

Variable-costs$-

.  

What electricity cost does the cost equation estimate for a level of activity of 500 machine hours?


Electricity costs$-


By what amount does this differ from March's observed cost for 500 machine hours?


Amount differ$-


SHOW SOLUTION


What electricity cost does the cost equation estimate for a level of activity of 700 machine hours?


Electricity costs$-


By what amount does this differ from June's observed cost for 700 machine hours?

Top Answer

Variable cost = $8 Fixed Cost = $100 Cost for 500 machine... View the full answer

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