### Analysis of Power Costs and Factory Machine HoursSunland Co. gathered the following information on power costs and factory machine usage for the last six months:| Month | Power Cost | Factory Machine Hours ||----------|--------------|-----------------------|| January | $28,390 | 15,800 || February | $36,069 | 21,400 || March | 32,895 | 18,700 || April | 26,235 | 15,100 || May | 23,890 | 13,500 || June | 20,700 | 10,500 |Using the high-low method of analyzing costs, answer the following questions and show computations to support your answers.#### (a) Variable Portion of Power Costs**Question:** What is the estimated variable portion of power costs per factory machine hour? **Answer:** $1.41 per factory machine hour.**Explanation:** To calculate the variable cost per factory machine hour using the high-low method, find the difference in costs and machine hours between the highest and lowest months.\[ \text{Variable cost per hour} = \frac{\text{Cost}_{\text{high}} - \text{Cost}_{\text{low}}}{\text{Hours}_{\text{high}} - \text{Hours}_{\text{low}}} = \frac{36,069 - 20,700}{21,400 - 10,500} = \frac{15,369}{10,900} = 1.41 \]#### (b) Fixed Power Costs**Question:** What is the estimated fixed power cost each month?**Answer:** $5,895 per month.**Explanation:**To find the fixed costs, use the total cost equation:\[ \text{Total cost} = \text{Fixed cost} + (\text{Variable cost per hour} \times \text{Number of hours}) \]Using the high month for demonstration:\[ 36,069 = \text{Fixed cost} + (1.41 \times 21,400) \]\[ \text{Fixed cost} = 36,069 - 30,174 = 5,895 \]This value will be the same when using the low month if calculated correctly as shown.#### (c) Total Power Cost

High-low method is one of the techniques that is used to separate fixed and variable components from…

Answered: c) If it is estimated that 13,800…

c) If it is estimated that 13,800 factory machine hours will be run in July, what is the expected total power cost for July? Total power cost $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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