Part 1
Part 2
High-Low Method |
Number of Jobs |
Repair costs |
High activity level |
260 |
24000 |
Low activity level |
80 |
9600 |
Change |
180 |
14400 |
Variable cost = (cost of highest activity – cost of lowest activity)/(highest activity – lowest activity) = (24000-9600)/(260-80) = $80 per job
Fixed costs = total cost – total variable cost = 24000-(80*260) = $3200
Cost function: Y=a+bX
Therefore,
Y = $3200 + $80X
Part 3
No, the formula developed above should not be used predict cost for a 600-job month as this level of activity does not fall in the relevant range. The maximum end point in the range is 260 jobs while the number of jobs for which manager wants to predict costs is 600. The difference between both is more than half. The fixed and variable costs are expected to increase with a large increase in activity level. Additional costs would be required to increase facilities, more employees would be hired, need of more equipment repairing and so on.
htlowb age 224 of 734 Contents costs incurred, along with the number of maintenance and repair...
Please answer asap! thank you! Rio Bus Tours has incurred the following bus maintenance costs during the recent tourist season. (The real is Brazil's national monetary unit. On the day this exercise was written, the real was equivalent in value to 0.2545 U.S. dollar.) Month November December January February March April Miles Traveled by Tour Buses 13,950 16,700 19,450 23,300 30,800 12,800 Cost 17,900 real 18,200 18,350 18,800 20,450 17,300 Required: 1. Use the high-low method to estimate the variable...