Question

Jackson ​Company, which uses the​ high-low method to analyze cost​ behavior, has determined that machine hours best predict the​ company's total utilities cost. The​ company's cost and machine hour usage data for the first six months of the year​ follow: LOADING...​(Click the icon to view the​ data.) Requirements Using the​ high-low method, answer the following​ questions: 1. What is the variable utilities cost per machine​ hour? 2. What is the fixed cost of utilities each​ month? 3. If Jackson Company uses 1 comma 230 machine hours in a​ month, what will its total costs​ be?

Answer 1

Answer:

1. What is the variable utilities cost per machine​ hour?

• $2.29 per machine hour

2. What is the fixed cost of utilities each​ month?

• $994

3. If Jackson Company uses 1 comma 230 machine hours in a​ month, what will its total costs​ be?

• $3,810.70

Explanation:

Some information was missing so I looked it up:

Month                  Total Cost             Machine Hours

January                $3,400                          1,050

February              $3,700                           1,150

March                  $3,500                           1,000

April                     $3,780                           1,200

May                     $4,000                           1,350

June                    $4,200                           1,400

variable costs using the high low method = ($4,200 - $3,400) / (1,400 - 1,050) = $800 / 350 = $2.2857 = $2.29 per machine hour

fixed costs = $4,200 - (1,400 x $2.29) = $994

total costs for 1,230 hours = $994 + (1,230 x $2.29) = $3,810.70