Cookie Crumbs bakes the best cookies in town. Customers line up for their fresh-made deluxe chocolate chip cookies. The cost of electricity is considered a mixed cost by the company. The variable portion of the electricity cost is assumed to be dependant on the number of units produced. The following is the related cost and activity data for the past six months.

 

Month	Volume of Cookies (number of units)	Cost of Electricity
July	32,000	$3,700
August	45,000	$4,500
September	35,000	$3,800
October	25,000	$3,400
November	60,000	$5,200
December	70,000	$6,000

 

Required

a) Using the high-low method, factor out the fixed and variable portions of the electricity cost.

b) Assume that the company used the least-square regression method to separate the fixed and variable portions of the electricity cost instead. The calculated formula was y = 0.079x + 1,842. What are the fixed and variable portions in this case?

Answer rating: 100% (QA)

a Using the highlow method we can determine the fixed and variable portions of the electricity cost ... View the full answer