Chapter 3 Homework

High-Low Method, Cost Formulas The controller of the South Charleston plant of Ravinia, Inc., monitored activities associated with materials handling costs. The high and low levels of resource usage occurred in September and March for three different resources associated with materials handling. The number of moves is the driver. The total costs of the three resources and the activity output, as measured by moves for the two different levels, are presented as follows: Resource Number of Moves Total Cost Furklift depreciation: LOW 6,500 $ 1.800 High 20,000 1,800 Indirect labor Low 6,500 20,000 $ 74,250 135,000 High Fuel and oil for forklift Low 6,500 $4,10 High 20,000 15,200 Required If required, round your answers to two decimal places. Enter a "o" if required. 1. Determine the cost behavior formula of each resource. Use the high-low method to assess the food and variable components. . Forklift depreciation: o F $ $ 1,800 Y 1,800 Indirect labor V 4.50 F $ 4.50 x Y $ 45,000 + 4.50 x Fuel and oil for forklift: 0.76 F o 0.76 x 2. Using your knowledge of cost behavior, predict the cost of each item for an activity output level of 9,000 moves. Forklift depreciation 1,800 Indirect labor $ 105,750 X Fuel and oil for forklift 6,840 3. Construct a cost formula that can be used to predict the total cost of the three resources combined. If required, round your answers to two decimal places. Materials handling cost = $1 10,260 X + $ 5.26 X Using this formula, predict the total materials handling cost if activity output is 9,000 moves. Y = $ 117,910 X