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 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

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 = $______

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