Given the following cost and activity observations for Bounty Company's utilities, use the high-low method to determine Boun variable utilities cost per machine hour. Round to the nearest cent. March April May June Cost $3,008 2,650 2,836 3,576 Machine Hours 15,304 9,532 12,041 17,572
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
![### Determining Bounty Company's Variable Utilities Cost per Machine Hour
Given the following cost and activity observations for Bounty Company’s utilities, use the high-low method to determine Bounty’s variable utilities cost per machine hour. **Round to the nearest cent.**
#### Data Table
| | Cost | Machine Hours |
|--------|--------|---------------|
| March | $3,008 | 15,304 |
| April | $2,650 | 9,532 |
| May | $2,836 | 12,041 |
| June | $3,576 | 17,572 |
#### Question:
What is the variable utility cost per machine hour?
- a. $1.27
- b. $0.12
- c. $0.58
- d. $0.54
#### Explanation:
To determine the variable cost per machine hour using the high-low method, follow these steps:
1. **Identify the highest and lowest levels of activity (machine hours):**
- Highest: June with 17,572 machine hours and cost of $3,576
- Lowest: April with 9,532 machine hours and cost of $2,650
2. **Calculate the difference in cost and machine hours between the highest and lowest activity levels:**
- Difference in cost = $3,576 - $2,650 = $926
- Difference in machine hours = 17,572 - 9,532 = 8,040
3. **Determine the variable cost per machine hour:**
\[
\text{Variable Cost per Machine Hour} = \frac{\text{Difference in Cost}}{\text{Difference in Machine Hours}} = \frac{926}{8040} \approx 0.12
\]
#### Answer:
The correct answer is:
- **b. $0.12**](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc9659bf0-1b68-44e7-9939-e8c666150000%2F15b02ab4-d564-45ee-9e05-21d1d3882472%2F8jtj82i_processed.jpeg&w=3840&q=75)
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