Lichtenstein Imports needs to determine the variable utilities rate per machine hour in order to estimate cost for August. Relevant information is as follows. Machine Hours Worked 5,650 5,200 7,500 9,000 Month Utilities Cost April Мay June July 10,060 9,940 11,725 13,400 Lichtenstein anticipates producing 6,000 units in August, each unit requiring 2.5 hours of machine time. The company uses the high- low method to analyze costs. Required: A. Calculate the variable and fixed components of the utilities cost. B. Using the data calculated above, estimate the utilities cost for August.
Lichtenstein Imports needs to determine the variable utilities rate per machine hour in order to estimate cost for August. Relevant information is as follows. Machine Hours Worked 5,650 5,200 7,500 9,000 Month Utilities Cost April Мay June July 10,060 9,940 11,725 13,400 Lichtenstein anticipates producing 6,000 units in August, each unit requiring 2.5 hours of machine time. The company uses the high- low method to analyze costs. Required: A. Calculate the variable and fixed components of the utilities cost. B. Using the data calculated above, estimate the utilities cost for August.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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### Midterm Graded Problems
**Problem:**
Lichtenstein Imports needs to determine the variable utilities rate per machine hour in order to estimate costs for August. Relevant information is as follows:
| Month | Machine Hours Worked | Utilities Cost |
|--------|----------------------|----------------|
| April | 5,650 | $10,060 |
| May | 5,200 | $9,940 |
| June | 7,500 | $11,725 |
| July | 9,000 | $13,400 |
Lichtenstein anticipates producing 6,000 units in August, with each unit requiring 2.5 hours of machine time. The company uses the high-low method to analyze costs.
**Required:**
**A.** Calculate the variable and fixed components of the utilities cost.
**B.** Using the data calculated above, estimate the utilities cost for August.
**Instructions:**
- For all requirements, round "variable cost per hour" to 2 decimal places and final answers to the nearest dollar amount.
**Calculation Table:**
| A. | |
|---------------------------|--------------------------------|
| Variable cost per hour | |
| Fixed cost | |
| B. | |
|---------------------------|--------------------------------|
| Total variable cost | |
| Total fixed cost | |
| Total utilities cost for August | |
*Note: The high-low method involves taking the highest and lowest activity levels and their associated costs to estimate variable and fixed costs.*
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*The text explains a problem related to cost estimation using the high-low method, providing data from April to July. The goal is to calculate variable and fixed costs and estimate August utilities costs based on anticipated production.*
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