Question

Use the information below to answer the following two questions: Chamomile Inc. is a manufacturing company whose total manufacturing overhead costs fluctuate somewhat from month to month according to the number of machine-hours worked in its production facility. These costs for the last four months in 2019 are given helow. September October November December Machine-hours 6.500 9.000 -5.000 10,000 Total manufacturing overhead $ 62.500 S 70.500 S 55.000 $ 70,000 The manufacturing overhead costs above consist of rent, maintenance, and utilities. The company has analyzed these costs at the 5.000 machine-hours level of activity as follows: Rent (fixed) Maintenance (mixed) Utilites (mixed) Total l'actory overhead costs 30.000 14.500 10500 55.000 The company also found that the lised maintenance cost in November was $4,500 3 The company expects that it will work for 8.000 machine-hours in January 2020. Using the high-low method, how much is the estimated utilities cost in January 2020? (Round to the nearest dollars.) A. S64.000 B. S16.125 S14.700 $13.500 None of the above Sulm the least squares regression method by Microsoft Excel and finds that the relation between total

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Answer 1

Chamomile Inc. Maintenance (Mixed) less: Maintenance (Fixed) Maintenance (Variable) $ $ $ 14,500 4,500 10,000 Number of machine hours Maintenance (Variable) ($10,000 / 5000) $ 5000 2 per machine hour Machine Maint. vc @ Maint Fixed Total Total Total hours $2 per hour Cost Maintenance Total Rent Manufact OH utilities A B C=A+B D E E-(C+D) 6,500 $ 13,000 $ 4,500 $ 17,500 $ 30,000 $ 62,500 $ 15,000 9,000 $ 18,000 $ 4,500 $ 22,500 $ 30,000 $ 70,500 $ 18,000 5,000 $ 10,000 $ 4,500 $ 14,500 $ 30,000 $ 55,000 $ 10,500 10,000 $ 20,000 $ 4,500 $ 24,500 $ 30,000 $ 70,000 $ 15,500 Computation of Variable cost - Utilities Machine hours Total Utilties High 10,000 $ 15,500 less: Low 5,000 $ 10,500 Difference 5,000 $ 5,000 Variable cost per hour (Utilities) 11 11 $ $ 5,000 / 5000 1.00 per hour Fixed cost $ $ 15,500 - (10000 x $1) 5,500 Computation of Estimated Utilties cost at 8,000 hours Variable Cost ( 8,000 x $ 1) Fixed Cost Total Cost of utilities ( 8,000 hours) $ $ $ 8,000 5,500 13,500 Therefore, Correct Answer D. $ 13,500

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