Question

In: Accounting

SHOW ALL WORK!! Machine hours and electricity costs for ABC Industries for the past eleven...

SHOW ALL WORK!!

Machine hours and electricity costs for ABC Industries for the past eleven months were as follows:

Month Electricity Costs Machine Hours

January $12,600 2,000

February 14,000 2,400

March 9,310 1,400

April 15,200 2,600

May 19,000 2,300

June 15,500 3,300

July 17,000 3,600

August 15,500 3,000

September 10,700 1,500

October 17,700 3,300

November 21,000 4,200

Required:

a. Using the high-low method, develop an estimate of variable electricity costs per machine hour. (Round to the nearest penny)

b. Using the high-low method, develop an estimate of fixed electricity costs per month.

c. Using the high-low method, develop a cost function for monthly electricity costs.

d. Estimate electricity costs for a month in which 5,000 machine hours are worked.

Expert Solution



		Month	Electricity Cost	Machine Hours
		Jan	12600	2000
		Feb	14000	2400
		Mar	9310	1400
		Apr	15200	2600
		May	19000	2300
		Jun	15500	3300
		Jul	17000	3600
		Aug	15500	3000
		Sep	10700	1500
		Oct	17700	3300
		Nov	21000	4200

			Electricity Cost	Machine Hours
		High Level	21000	4200
		Low Level	9310	1400
		Difference	11690	2800

A		Variable Cost Per MH:
	A	Electricity Cost	11690
	B	Machine Hours	2800
	A/B	Variable Cost Per MH	4.1750	Per MH


B		Cost at 4200 MH:
		Total Cost	21000
		Less: Variable Cost(4.175*4200)	17535
		Fixed Cost	3465


C		TC(Y)=3465+4.175X



D		MH: (5000 MHs)
		Variable Cost(5000*4.1750)	20875
		Fixed Cost	3465
		Total Cost	24340

ekkarill92 answered 1 year ago

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