a.
Variable cost per machine hour= (Highest activity cost - Lowest activity cost)/(Highest activity - Lowest activity)
= (6,580-2,450)/(820-230)
= 4,130/590
= $7 per machine hour
Fixed cost = Highest activity cost - Highest activity x Variable cost per machine hour
= 6,580 - (820 x 7)
= 6,580-5,740
= $840
b.
Cost equation :
Total cost = Fixed cost + Variable cost per machine hour x Number of machine hours
= 840 + 7 x Number of machine hours
Electricity cost of 480 machine hours = 840 + 7 x Number of machine hours
= 840 + 7 x 480
= 840+3,360
= $4,200
March's observed cost for 480 machine hours = $3,520
Amount difference = Electricity cost of 480 machine hours - March's observed cost for 480 machine hours
= 4,200-3,520
= $680
C.
in June, there are 800 machine hours given in the question. Hence, part (c) could only be solved by taking 800 hours of June.
Electricity cost of 800 machine hours = 840 + 7 x Number of machine hours
= 840 + 7 x 800
= 840+5,600
= $6,440
June's observed cost for 800 machine hours = $4,910
Amount difference = Electricity cost of 800 machine hours - June's observed cost for 800 machine hours
= 6,440-4,910
= $1,530
Kindly comment if you need further assistance.
Thanks‼!
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total
total
Month
Maintenance Costs
Machine Hours
1
2460
3500
2
3000
4000
3
3600
6000
4
4500
7900
5
3200
5000
6
4620
8000
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high-low method.
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monthly expense data for use in analyzing the cost behavior of
maintenance costs.
Month
Total
Maintenance Costs
Total
Machine Hours
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330
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2,890
380
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3,490
530
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4,390
660
May
3,090
530
June
5,530
730
Your answer is incorrect. Try again.
Determine the variable cost components using the high-low method.
(Round variable cost to 3 decimal places e.g.
12.250.)
Variable cost per machine hour
$
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