Question

In: Accounting

MachineElectricityMachineElectricityMonthHoursCostsMonthHoursCostsJanuary 18,400 $ 7,393 July 20,400 $ 7,894 February 22,000 $ 8,672 August 20,500 $ 8,055...

MachineElectricityMachineElectricityMonthHoursCostsMonthHoursCostsJanuary 18,400 $ 7,393 July 20,400 $ 7,894 February 22,000 $ 8,672 August 20,500 $ 8,055 March 21,000 $ 8,226 September 22,400 $ 8,897 April 20,100 $ 7,808 October 22,200 $ 8,810 May 19,800 $ 7,511 November 21,900 $ 8,591 June 18,200 $ 7,301 December 21,100 $ 8,442 Using the high-low method determine:(a) the variable electricity cost per machine hour(b) the monthly fixed electricity cost in total.(c) the estimated total electricity costs for 24,000 machine hours.

Expert Solution

Answer:

(a) Determination of variable electricity cost per machine hour is as follows:

Variable cost = (Electricity costs for the highest machine hours used - Electricity costs for lower machine hours used) / (Highest machine-hours - Lowest machine hours)

= ($8,897 - $7,301) / (22,400 - 18,200)

= $1,596 / 4,200

= $0.38 per machine hour

Therefore, the variable electricity cost per machine hour is $0.38

(b) Determination of monthly fixed electricity costs in total is as follows:

Fixed electricity costs = Total electricity cost for 22,400 machine hours - ( Machine hours x variable electricity cost)

= $8,897 - (22,400 x $0.38)

= $385

Therefore, the monthly fixed electricity costs in total is $385.

(c) Estimation of total electricity costs for 24,000 machine hours is as follows:

Total electricity costs = $385 + (24,000 machine hours x $0.38)

= $9,505

Therefore, total electricity costs for 24,000 machine hours is $9,505.

ekkarill92 answered 1 year ago

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