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Required: A. Calculate the variable and fixed components of the utilities cost. B. Using the data calculated above, estimate the utilities cost for August.

Required: A. Calculate the variable and fixed components of the utilities cost. B. Using the data calculated above, estimate the utilities cost for August.

FINANCIAL ACCOUNTING
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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**Lichtenstein Imports Utilities Cost Analysis** Lichtenstein Imports needs to determine the variable utilities rate per machine hour to estimate the cost 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. *All requirements should round the "variable cost per hour" to 2 decimal places and final answers to the nearest dollar amount.* **Solution:** | Calculation | Amount | |-------------|--------| | **A.** Variable cost per hour | $0.91 | | Fixed cost | $4,355 | | Calculation | Amount | |-------------|--------| | **B.** Total variable cost | (to be calculated) | | Total fixed cost | $4,355 | | Total utilities cost for August | (to be determined) | This analysis helps in understanding how utility costs vary with machine hours, assisting in budgeting and planning for future production.
Transcribed Image Text:**Lichtenstein Imports Utilities Cost Analysis** Lichtenstein Imports needs to determine the variable utilities rate per machine hour to estimate the cost 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. *All requirements should round the "variable cost per hour" to 2 decimal places and final answers to the nearest dollar amount.* **Solution:** | Calculation | Amount | |-------------|--------| | **A.** Variable cost per hour | $0.91 | | Fixed cost | $4,355 | | Calculation | Amount | |-------------|--------| | **B.** Total variable cost | (to be calculated) | | Total fixed cost | $4,355 | | Total utilities cost for August | (to be determined) | This analysis helps in understanding how utility costs vary with machine hours, assisting in budgeting and planning for future production.
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