BlueDenim Company makes blue jeans. The company controller wants to calculate the fixed and variable costs associated with electricity used in the factory. Data for the past 8 months were collected: Required: Month Electricity Cost Machine Hours January $ 3,255.00 460 February S 3,485.00 500 March $ 4,100.00 600 April $ 3,300.00 470 May $ 3,312.00 470 June S 2,575.00 350 July $ 3,910.00 570 August $ 4,200.00 590 A. Using the Scatter-Diagram Method. 1. Calculate the fixed cost of electricity 2. Calculate the variable rate per machine hour 3. Construct the cost formula for the total electricity cost B. Using the Least-squares Regression Method, 1. Calculate the fixed cost of electricity 2. Calculate the variable rate per machine hour. 3. Calculate the budgeted cost for next month, assuming that 550 machine hours are budgeted. C. Using the high-low method, 1. Calculate the variable rate per machine hour 2. Calculate the fixed cost of electricity 3. Construct the cost formula for total electricity cost 4. Assume that 550 machine hours are budgeted for the month of October. Use the previous cost formula to calculate a. Total variable electricity cost for October Total electricity cost for October 5. Assume that 6,500 machine hours are budgeted for the coming year. Use the previous cost to calculate a. total variable electricity cost for the year b. total fixed electricity cost for the year C. total electricity cost for the coming year
BlueDenim Company makes blue jeans. The company controller wants to calculate the fixed and variable costs associated with electricity used in the factory. Data for the past 8 months were collected: Required: Month Electricity Cost Machine Hours January $ 3,255.00 460 February S 3,485.00 500 March $ 4,100.00 600 April $ 3,300.00 470 May $ 3,312.00 470 June S 2,575.00 350 July $ 3,910.00 570 August $ 4,200.00 590 A. Using the Scatter-Diagram Method. 1. Calculate the fixed cost of electricity 2. Calculate the variable rate per machine hour 3. Construct the cost formula for the total electricity cost B. Using the Least-squares Regression Method, 1. Calculate the fixed cost of electricity 2. Calculate the variable rate per machine hour. 3. Calculate the budgeted cost for next month, assuming that 550 machine hours are budgeted. C. Using the high-low method, 1. Calculate the variable rate per machine hour 2. Calculate the fixed cost of electricity 3. Construct the cost formula for total electricity cost 4. Assume that 550 machine hours are budgeted for the month of October. Use the previous cost formula to calculate a. Total variable electricity cost for October Total electricity cost for October 5. Assume that 6,500 machine hours are budgeted for the coming year. Use the previous cost to calculate a. total variable electricity cost for the year b. total fixed electricity cost for the year C. total electricity cost for the coming year
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:BlueDenim Company makes blue jeans. The company controller wants to calculate the
fixed and variable costs associated with electricity used in the factory. Data for the past 8
months were collected:
Required:
Month
Electricity Cost
Machine Hours
January
$
3,255.00
460
February
S
3,485.00
500
March
$
4,100.00
600
April
$
3,300.00
470
May
$
3,312.00
470
June
S
2,575.00
350
July
$
3,910.00
570
August
$
4,200.00
590
A. Using the Scatter-Diagram Method.
1. Calculate the fixed cost of electricity
2. Calculate the variable rate per machine hour
3. Construct the cost formula for the total electricity cost
B. Using the Least-squares Regression Method,
1. Calculate the fixed cost of electricity
2. Calculate the variable rate per machine hour.
3. Calculate the budgeted cost for next month, assuming that 550 machine hours are
budgeted.
C. Using the high-low method,
1. Calculate the variable rate per machine hour
2. Calculate the fixed cost of electricity
3. Construct the cost formula for total electricity cost
4. Assume that 550 machine hours are budgeted for the month of October. Use the
previous cost formula to calculate
a. Total variable electricity cost for October
Total electricity cost for October
5. Assume that 6,500 machine hours are budgeted for the coming year. Use the
previous cost to calculate
a. total variable electricity cost for the year
b.
total fixed electricity cost for the year
C.
total electricity cost for the coming year
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