Question

% E10-25 (similar to) n Hel Data Table Sherman Corporation wants to find an equation to estimate some of their monthly operating costs for the d E (Click the icon to view the cost and other data) Shipping Maintenance Machine Health Number of Units Read the requirements. Costs Month Hours Insurance Employees Costs Shipped Requirement 1. Which of the preceding costs is variable? Fixed? Mixed? Explain. January 4,530 167 $ 8,640 59 22,688 7,090 February 100 2$ 80 26,208 8,190 4,440 8,640 Cost March 4,615 225 24 94 25,376 7,930 8,640 Cost function Explanation The cost neither remains constant in total nor remains constant per uni April $ 4,875 302 8,640 101 6,440 Mixed 20,608 Maintenance Although the cost driver varies from month to month, the total cost rem May $ 468 $ 92 $ 18,592 Fixed 5,143 8,640 5,810 Health insurance 278 2$ 85 29,568 9,240 Variable The cost per unit remains constant each month. June 4,751 8,640 Shipping costs 8,680 July $ 4,921 339 8,640 88 27,776 Requirement 2. Using the high-low method, determine the cost function for each cost. August 4,971 363 2$ 84 27,072 8,460 8,640 Begin by selecting the general formula that represents the linear cost function for each cost. September 5,033 429 8,640 91 21,728 6,790 y = a + bX Maintenance October 5,245 7,140 473 8,640 112 22,848 Health insurance уза November 540 102 18,016 5,630 5,276 8,640 y = bx Shipping costs December 2$ 4,723 276 101 $ 31,040 9,700 8,640 Now determine the cost function for each cost. (Enter all values in the same format as the general linear fo Print Done Cost function Maintenance Health insurance Shipping costs

Answer 1

Cost function:

Maintenance : y = 4,250 + 1.90 X

Health Insurance : y = 8,640

Shipping Costs = 3.2 X

High-low method for maintenance costs:

Variable cost per machine hour = $ ( 5,276 - 4,440) / ( 540 - 100 ) machine hours = $ 1.90 per machine hour.

Fixed cost per month = $ 5,276 - 540 x $ 1.90 = $ 4,250