Question

Vargis Corporation has a machining capacity of 215,000 hours per year. Utilization of capacity is normally 75%; it has been as low as 40% and as high as 90%. An analysis of the accounting records revealed the following selected costs:

	At a 40% Utilization Rate				At a 90% Utilization Rate
Cost A:
Total	$	455,000			$	455,000
Per hour	$	7.00				?
Cost B:
Total		?			$	1,959,000
Per hour	$	12.30			$	12.30
Cost C:
Total	$	755,000			$	1,345,000
Per hour	$	16.00			$	8.89

Vargis uses the high-low method to analyze cost behavior.

Required:

1. Classify each of the costs as being either variable, fixed, or semivariable.
2. Calculate amounts for the two unknowns in the preceding table. (Round "Cost A" to 2 decimal places.)
3. Calculate the total amount that Vargis would expect at a 75% utilization rate for Cost A, Cost B, and Cost C. (Do not round intermediate calculations. Round your final answer to the nearest dollar amount.)

Answer 1