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 = $______
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 |
||||
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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