Question

The controller of Fortnight Co. has requested a quick estimate of the manufacturing supplies needed for the Cleveland Plant for the month of July, when production is expected to be 660,000 units to meet the ending inventory requirements and sales of 665,000 units. Fortnight Co.'s budget analyst has the following actual data for the last three months. Month Production in Units Manufacturing Supplies March 545,000 $ 651,960 April 730,000 855,460 May 670,000 769,410 Using the high-low method to develop a cost estimating equation, the total estimated cost of needed manufacturing supplies for July would be: (CMA adapted)

Answer 1

Answer:

$778460

Explanation:

Using the highlow method, we calculate the variable cost per unit,

• VC / unit = 855460 - 651960 / 730000 - 545000  = $1.1per unit

• The total fixed cost will be = 855460 - (1.1 * 730000) = $52460

The cost estimating equation will be,

• Total cost at x number of unit = 1.1x + 52460

The cost of manufacturing supplies for the month of July will be,

• Total cost (July) = 1.1(660000) + 52460   = $778460