Question

hich uses the​ high-low method to analyze cost​ behavior, has determined that machine hours best predict the​ company's total utilities cost. The​ company's cost and machine hour usage data for the first six months of the year​ follow: LOADING...​(Click the icon to view the​ data.) Requirements Using the​ high-low method, answer the following​ questions: 1. What is the variable utilities cost per machine​ hour? 2. What is the fixed cost of utilities each​ month? 3. If Smith Company uses 1 comma 220 machine hours in a​ month, what will its total costs​ be?

Answer 1

1)- Variable utilities cost per machine hour = 1.6 per machine hour

2)- Fixed cost = 1740

3)-Total cost on 1220 Machine hour will be

= 3692

Explanation:

1) CALCULATE VARIABLE UTILITIES COST PER MACHINE HOUR :

Variable utilities cost per machine hour = Change in cost/high machine hour-low machine hour

=4076-3388/1460-1030

Variable utilities cost per machine hour = 1.6 per machine hour

2) Fixed cost = Total cost-variable cost

= 3388-(1030*1.6)

Fixed cost = 1740

3) Total cost on 1220 Machine hour will be (1220*1.6+1740) = 3692