Question

Corporation wants to find an equation to estimate some of their monthly operating costs for the operating budget for

2018. The following cost and other data were gathered for 2017​:

DATA TABLE :

Month Maintenance Costs Machine Hours Health Insurance Number of Employees Shipping Costs Units Shipped

January

$4,450

158 .

$8,560

58

$22,784

7,120

February

$4,375

125

$8,560

79

$26,272

8,210

March

$4,675

233

$8,560

91

$25,440

7,950

April

$4,880

315

$8,560

108

$20,576

6,430

May

$5,140

463

$8,560

90

$19,008

5,940

June

$4,715

277

$8,560

84

$29,696

9,280

July

$4,947

335

$8,560

94

$27,776

8,680

August

$4,941

357

$8,560

86

$26,816

8,380

September

$5,022

419

$8,560

92

$21,568

6,740

October

$5,226

483

$8,560

110

$22,944

7,170

November

$5,244

520

$8,560

95

$17,952

5,610

December

$4,735

277

$8,560

95

$30,688

9,590

	Cost
Cost	function	Explanation
Maintenance	Mixed	The cost neither remains constant in total nor remains constant per unit.
Health insurance	Fixed	Although the cost driver varies from month to month, the total cost remains constant.
Shipping costs	Variable	The cost per unit remains constant each month.

Requirement 1. Which of the preceding costs is​ variable? Fixed?​ Mixed? Explain.

Requirement 2. Using the​ high-low method, determine the cost function for each cost.

Begin by selecting the general formula that represents the linear cost function for each cost.

Maintenance	y = a + bX
Health insurance	y = a
Shipping costs	y = bX

Now determine the cost function for each cost. ​(Enter all values in the same format as the general linear formula. If a box is not used in the​ equation, leave the box​ empty; do not enter a zero or select a​ label.)

Cost function
Maintenance	1)y = ______	2)_____	+		per machine hour
Health insurance	3)y =______		+		per employee
Shipping costs	y =	4)______	+		per unit shipped

2. Using the​ high-low method, determine the cost function for each cost.1. Which of the preceding costs is​ variable? Fixed?​ Mixed? Explain.

3. Combine the preceding information to get a monthly operating cost function for the Silk Corporation.

4.Next​ month, Silk expects to use 470 machine​ hours, have 140 employees, and ship 8,900 units. Estimate the total operating cost for the month.

5. This question is continued, Can you help me with the rest. Requirement 3. Combine the preceding information to get a monthly operating cost function for the Silk Corporation. Monthly operating = 1)______ + 2) ______ 3)________ + 4)_______ 5)________ 3) & 4) are a multiple choice. These are the options : per employee, or per machine hours or per units shipped.

Answer 1

1.

Cost	Function	Explanation
Maintenance	Mixed	The cost neither remains constant in total nor remains constant per unit
Health insurance	Fixed	Although the cost driver varies from month to month, the total cost remains constant
Shipping costs	Variable	The cost per unit remains constant each month.

2.

Maintenance :

Variable cost per machine hour = $5,226 - 4,375 / 483 - 125 = $2.377 per machine hour

Fixed cost = $5,226 - (483*$2.377) = $4,078

Health insurance:

y = $8,560

Shipping cost:

Variable cost per units shipped = $22,784 / 7,120 = $3.2 per unit shipped

Cost Function:
Maintenance	y	=	$4,078	+	$2.377	per machine hour
Health insurance	y	=	$8,560
Shipping cost	y	=		+	$3.2	per units shipped

3.

Monthly operating cost function = $12,638 + $3.2 per units shipped + $2.377 per machine hour

4.

Total operating cost for next month = $12,638+$3.2*8,900+$2.377*470

Total operating cost for next month = $12,638+28,480+1,117 = $42,235