Question Completion:
See attached.
Answer:
Luwak Coffees
1. Water bill is fixed. Electricity bill is variable. Telephone bill is mixed.
2. High-Low method:
Water bill = $120 + 0q
Electricity bill = $0.3q
Telephone bill = $140 + $0.02q
where q = the quantity of each cost consumed.
3. Water bill = $120 + 0q
Electricity bill = $0.3q
Telephone bill = $140 + $0.02q
= $260 + $0.32q
4. No solution. There is no relationship with machine hours, employees, and units with utility bills.
Explanation:
a) Data and Calculations:
Month Electricity Bill Kilowatt Hours Used
January $ 720 2,400
February $ 840 2,800
March $1,098 3,660
April $ 810 2,700
May $1,176 3,920
June $1,248 4,160
July $1,044 3,480
August $1,194 3,980
September $1,260 4,200
October $1,230 4,100
November $1,188 3,960
December $1,266 4,220
Telephone Bill $184.
Low cost = Jan $ 720 2,400
High cost = December $1,266 4,220
High cost = December $1,266 4,220
Low cost = Jan $ 720 2,400
Difference = $546 1,820
Variable cost per unit = $546/1,820 = $0.3 per kwh
Fixed cost, using December's figures:
Variable cost = $1,266
Fixed cost = $0 ($1,266 - 4,220 * $0.3)
Telephone bill:
High, June $197.60 2,880
Low, April 178.20 1,960
Difference $18.40 920
Variable cost = $18.40/920 = $0.02
Fixed cost = Total cost - Variable cost
= $197.60 - (2,880 * $0.02)
= $140
