ABC company incurred the following maintenance costs during the past 6 months 

Table 1

 

REQUIRED 

1. Use a scattergraph and the two points that seem to best represent the relationship between cost and activity levels of 1000 and 2000 machine hours. Use these two points , estimate the variable cost and the fixed cost [ components of maintenance costs]

 2. Develop a cost function that the company can use to estimate maintenance cost at different volume levels

 3. Estimate maintenance costs for July if the company expects to use 2800 machine hours 

Question 2 

A. Use the data on Table 1, estimate the variable and fixed cost of the company using the high and low method

 B. Develop a cost function for the company. C. Estimate the maintenance cost if 3000 machine hours were used in July

Transcribed Image Text:

Table 1 Months Machine hours Cost 1 2200 8560 2. 1000 4200 3 1200 5920 6280 4 1600 5 1300 4020 1900 7020 2000 8400 8 2300 9500 500 2000 Table 1 Months Machine hours Cost 1 2200 8560 2. 1000 4200 3 1200 5920 6280 4 1600 5 1300 4020 1900 7020 2000 8400 8 2300 9500 500 2000