Chapter 3 Q2
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School
Douglas College *
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Course
1100
Subject
Industrial Engineering
Date
Dec 6, 2023
Type
docx
Pages
2
Uploaded by unchartedfan12
Davidson Engine Repairs provides maintenance and repair services for small engines such as
those found in lawn mowers, power saws, and snow throwers. The repair shop costs include the
salaries for the mechanics, insurance and depreciation on the repair equipment, materials and
parts used for the jobs, and utilities. The repair shop manager would like to develop a model for
predicting repair costs and over the past 10 months has carefully recorded the total repair costs
incurred, along with the number of maintenance and repair jobs completed each month. The data
are shown below:
Month
Jobs Repair Costs
January
255 $
40,110
February
239 $
36,763
March
272 $
42,454
April
249 $
38,468
May
328 $
47,746
June
320 $
47,135
July
195 $
31,890
August
154 $
24,978
September 161 $
26,167
October
108 $
18,706
Required:
1.
Not available in Connect.
2.
Using the high–low method, estimate a cost formula for repair costs. Express the formula in
the form
Y
=
a
+
bX
.
Y =
$4,450 + $132 X
3.
Not available in Connect.
Explanation
2.
High-low method:
Number of
Jobs
Repair
Costs
High
activit
y level
328
$
47,746
Low
activit
y level
108
18,706
Chang
220
$
29,040
e
Variable cost per job:
Change in cost
=
$29,040
= $132 per job
Change in activity
220 jobs
Fixed
cost:
Total repair cost at
high activity level
$
47,746
Less variable element:
328 jobs × $132 per
job
43,296
Fixed cost element
$
4,450
Therefore, the cost formula is: Y = $4,450 + $132X.
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