Question

For Hawthorne:
Observation

Month Total Operating Costs Hours July August September October November $24.900 24,000 36,400 44,160 45,000 5.250 5,500 7,500 9,750 9,500

What is the estimated total cost if the company expects to have an operating level of 8,000 hours used?

$43,740

$36,670

$46,875

$37,125

Answer 1

Calculate requirements as follows: lo A B 1 Particulars Amount 2 Cost at highest level $ 44,160 3 Cost at lowest level $ 24,900 4 Difference in cost $ 19,260 5 Difference in hours 4500 6 Variable cost per hour $ 4.28 7 Total cost at 5250 hours $ 24,900 8 Less variable costs $ 22,470 9 Fixed cost $ 2,430 10 Cost at 8000 hours of operating levels 36,670 ll Thus, $36670 is the correct answer. Calculations: A B 1 Particulars Amount 2 Cost at highest level 44160 3 Cost at lowest level 24900 4 Difference in cost =B2-B3 5 Difference in hours =9750-5250 6 Variable cost per hour =B4/B5 7 Total cost at 5250 hours 24900 8 Less variable costs =5250*B6 9 Fixed cost =B7-B8 10 Cost at 8000 hours of operating level =B9+(8000*B6)