David, the CEO of a beverage company, wants to understand the reason for the erratic performance of one of the company's product
1 answer:
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Answer:
$633,000.
Explanation:
We use the High-low method to get the cost formula:
This means 5,000 machine hours generate 140,000 labor cost
We divide and get the variable cost generate per machine hour:
Cost 140000
machine hours 5000
140,000/5,000 = 28
variable cost 28
Next, we use this to calculate the fixed cost:
total cost = variable cost + fixed cost
fixed cost = total cost - 28 X DL
<u>High:</u>
Total Cost 710,000
Variable 399,000 (14,250 x 28)
Fixed Cost 311,000
<u>Low:</u>
Total Cost 570,000
Variable 259,000 (9,250 x 28)
Fixed Cost 311,000
Now with the cost formula we solve for 11,500 machine hours
cost = 311,000 + 28 X Machine Hours
cost = 311,000 + 28 x 11,500
cost = 633,000