Question Content Area High-Low Method, Cost Formulas The controller of the South Charleston plant of Ravinia, Inc., monitored activities associated with materials handling costs. The high and low levels of resource usage occurred in September and March for three different resources associated with materials handling. The number of moves is the driver. The total costs of the three resources and the activity output, as measured by moves for the two different levels, are presented as follows: Resource        Number of Moves        Total Cost Forklift depreciation:                   Low        4,500                $3,400       High        15,500                3,400       Indirect labor:                   Low        4,500                $59,800       High        15,500                130,200       Fuel and oil for forklift:                   Low        4,500                $3,285       High        15,500                11,315       Required: If required, round your answers to two decimal places. Enter a "0" if required. 1. Determine the cost behavior formula of each resource. Use the high-low method to assess the fixed and variable components. Forklift depreciation: V $_____ F $_____ Y $_____ Indirect labor: V $____ F $___ Y $____ + $_____ Fuel and oil for forklift: V $_____ F $_____ Y $_____   2. Using your knowledge of cost behavior, predict the cost of each item for an activity output level of 9,000 moves.   Forklift depreciation $____ Indirect labor $____ Fuel and oil for forklift $_____ 3.  Construct a cost formula that can be used to predict the total cost of the three resources combined. If required, round your answers to two decimal places. Materials handling cost = $____ + $_____ Using this formula, predict the total materials handling cost if activity output is 9,000 moves. Y = $______

FINANCIAL ACCOUNTING
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High-Low Method, Cost Formulas

The controller of the South Charleston plant of Ravinia, Inc., monitored activities associated with materials handling costs. The high and low levels of resource usage occurred in September and March for three different resources associated with materials handling. The number of moves is the driver. The total costs of the three resources and the activity output, as measured by moves for the two different levels, are presented as follows:

Resource        Number of Moves        Total Cost
Forklift depreciation:                  
Low        4,500                $3,400      
High        15,500                3,400      
Indirect labor:                  
Low        4,500                $59,800      
High        15,500                130,200      
Fuel and oil for forklift:                  
Low        4,500                $3,285      
High        15,500                11,315      

Required:

If required, round your answers to two decimal places. Enter a "0" if required.

1. Determine the cost behavior formula of each resource. Use the high-low method to assess the fixed and variable components.

Forklift depreciation:
V $_____
F $_____
Y $_____
Indirect labor:
V $____
F $___
Y $____ + $_____
Fuel and oil for forklift:
V $_____
F $_____
Y $_____

 

2. Using your knowledge of cost behavior, predict the cost of each item for an activity output level of 9,000 moves.

 

Forklift depreciation $____
Indirect labor $____
Fuel and oil for forklift $_____

3.  Construct a cost formula that can be used to predict the total cost of the three resources combined. If required, round your answers to two decimal places.
Materials handling cost = $____ + $_____

Using this formula, predict the total materials handling cost if activity output is 9,000 moves.
Y = $______

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