Wayne Mueller, financial analyst at CELL Corporation, is examining the behav- ior of quarterly utility costs for budgeting purposes. Mueller collects the following data on machine-hours worked and utility costs for the past 8 quarters: Utility Costs $215,000 Quarter Machine-Hours 120,000 150,000 200,000 270,000 170,000 250,000 225,000 195,000 2 75,000 110,000 150,000 90,000 140,000 130,000 3 4 5 100,000 1. Estimate the cost function for the quarterly data using the high-low method. 2. Plot and comment on the estimated cost function. 3. Mueller anticipates that CELL will operate machines for 125,000 hours in quarter 9. Calculate the pre- dicted utility costs in quarter 9 using the cost function estimated in requirement 1.

Wayne Mueller, financial analyst at CELL Corporation, is examining the behav- ior of quarterly utility costs for budgeting purposes. Mueller collects the following data on machine-hours worked and utility costs for the past 8 quarters: Utility Costs $215,000 Quarter Machine-Hours 120,000 150,000 200,000 270,000 170,000 250,000 225,000 195,000 2 75,000 110,000 150,000 90,000 140,000 130,000 3 4 5 100,000 1. Estimate the cost function for the quarterly data using the high-low method. 2. Plot and comment on the estimated cost function. 3. Mueller anticipates that CELL will operate machines for 125,000 hours in quarter 9. Calculate the pre- dicted utility costs in quarter 9 using the cost function estimated in requirement 1.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter3: Cost Behavior And Cost Forecasting

Section: Chapter Questions

Problem 20BEA: Using Regression to Calculate Fixed Cost, Calculate the Variable Rate, Construct a Cost Formula, and...

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