Ch18 Q10 b

Answer b

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The controller of Cultumber Production has collected the following monthly expense data for analyzing the cost behavior of electricity costs. January February March April May June July August September October November December Total Electricity Costs $2.480 2.900 3,520 4,780 3,220 5,000 4,090 3,810 5.110 4270 3,320 5,840 Total Machine Hours 210 340 500 685 420 750 650 510 675 600 340 770 (a) Your answer is correct. Determine the fixed- and variable-cost components using the high-low method. Fbed-costs $ 1220 Variable-costs $ 6 (b) What electricity cost does the cost equation estimate for a level of activity of 500 machine hours? Electricity costs $ By what amount does this differ from March's observed cost for 500 machine hours? Amount differ $