The following information is available about electricity costs for the first six months of the year. Management think that electricity costs are likely to be related to how long machines are running. Month Machine hours Electricity Cost January 2,800 $2,925 February 5,600 $5,526 March 6,200 $5,980 April 3,500 $3,620 May 2,300 $2,470 June 4,500 $4,450 You may wish to refer to the formula sheet to answer this question. If you haven't already downloaded it, you can download it here. Required: Using the high-low method, (a) calculate the fixed costs b. state the cost formula for estimating the electricity cost based on the machine hours
The following information is available about electricity costs for the first six months of the year. Management think that electricity costs are likely to be related to how long machines are running. Month Machine hours Electricity Cost January 2,800 $2,925 February 5,600 $5,526 March 6,200 $5,980 April 3,500 $3,620 May 2,300 $2,470 June 4,500 $4,450 You may wish to refer to the formula sheet to answer this question. If you haven't already downloaded it, you can download it here. Required: Using the high-low method, (a) calculate the fixed costs b. state the cost formula for estimating the electricity cost based on the machine hours
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The following information is available about electricity costs for the first six months of the year. Management think that electricity costs are likely to be related to how long machines are running.
|
|
Machine |
Electricity |
|
January |
2,800 |
$2,925 |
|
February |
5,600 |
$5,526 |
|
March |
6,200 |
$5,980 |
|
April |
3,500 |
$3,620 |
|
May |
2,300 |
$2,470 |
|
June |
4,500 |
$4,450 |
You may wish to refer to the formula sheet to answer this question. If you haven't already downloaded it, you can download it here.
Required:
Using the high-low method,
(a) calculate the fixed costs
b. state the cost formula for estimating the electricity cost based on the machine hours
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