"Prepare a"

Question 7 options:

Entry Rules:

Round your answers as required below.

Never enter $ or , when inputting numerical answers

QUESTION:

The manager of Drivemo Inc. wants to determine a cost formula for their power costs. Cost analysis has determined that these costs are mixed and must be broken into their fixed and variable components. Machine Hours has been selected as the activity driver for the power costs. The following data for the last eight (8) month period have been collected:

Month	Machine Hours	Power Costs
March	2,780	$36,000
April	17,010	$55,600
May	3,270	$39,300
June	16,350	$58,900
July	6,540	$41,700
August	19,300	$64,800
September	17,990	$58,900
October	5,230	$38,900

Using the high-low method, prepare a cost formula for the power costs.

Management has asked you to round the fixed costs to the nearest dollar and round the variable cost to the nearest penny.

Part 1:

What is the variable cost per activity? Be sure to round to the nearest penny (2 decimal places).

Part 2:

What is the fixed costs per month?

Be sure to round to the nearest dollar (whole number).

In addition, be sure to use the rounded answer from Part 1 for the variable costs in order to calculate the fixed costs!

NOTE: you can use the high or the low point in order to calculate the fixed costs.

Part 3:

Using your answers to Part 1 and 2, develop a cost formula.

Using that cost formula, calculate the total predicted costs if the level of activity was 17,950.

Round your answer to the nearest dollar (whole number).

Part 4:

Develop an annual cost formula for power costs.

What is the variable cost per activity in your cost formula?

Be sure to round to the nearest penny (2 decimal places)?

What is the fixed costs in the annual cost formula for power costs?

Round your answer to the nearest dollar (whole number)