Question

Blacken Company manufactures motorcycles. The company's management accountant wants to calculate the fixed and variable costs associated with utility cost incurred by the factory. Data for the past five months were collected. Utility Machine Month cost hours March $30,255 2,200 April 32,750 2,525 May 34,712 2,710 June 31,850 2,410 July 30,720 2,290 Using a regression program, the forecasted utility cost at 2,300 machine hours (rounded to the nearest dollar) is: (Round the intermediate calculations to two decimal places.) a.$37,116.

Answer 1

Answer:

fixed cost = 11.026,6

Explanation:

we will use the High-Low method to sovle for variable and fixed component of utilities:

We subtract the high form the low

$\left[\begin{array}{ccc}High&2710&34712\\Low&2200&30255\\Diference&510&4457\\\end{array}\right]$

510 hours generates 4,457 cost in utilities.

so variable cost:

4,457 / 210 = 8.74

Then we solve for fixed cost:

total cost = variable cost x Q + fixed cost

34,712 = 8.74(2,710) + fixed cost

fixed cost = 11.026,6