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3 years ago

The following data relate to the Torrence Company for May and August:

Business

1 answer:

Zinaida [17]3 years ago

7 0

Answer:

Total cost= $1,193,000

Explanation:

Giving the following information:

May August

Maintenance hours 25,000 29,000

Maintenance cost $1,175,000 $1,247,000

First, we need to calculate the variable and fixed costs using the following formulas:

Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)

Variable cost per unit= (1,247,000 - 1,175,000) / (29,000 - 25,000)

Variable cost per unit= $18

Fixed costs= Highest activity cost - (Variable cost per unit * HAU)

Fixed costs= 1,247,000 - (18*29,000)

Fixed costs= $725,000

Fixed costs= LAC - (Variable cost per unit* LAU)

Fixed costs= 1,175,000 - (18*25,000)

Fixed costs= $725,000

Now, the total cost for 26,000 hours:

Total cost= 725,000 + 18*26,000

Total cost= $1,193,000

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