Problem 5-1A

The controller of Rather Production has collected the following monthly expense data for analyzing the cost behavior of electricity costs.

Total Electricity CostsTotal Machine Hours

January$2,500300

February3,000350

March3,600500

April4,500690

May3,200400

June4,900700

July4,100650

August3,800520

September5,100680

October4,200630

November3,300350

December5,860720

Determine the fixed- and variable-cost components using the high-low method.

Fixed-costs$

Variable-costs$

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 Marchs observed cost for 500 machine hours?

Amount differ$

What electricity cost does the cost equation estimate for a level of activity of 700 machine hours?

Electricity costs$

By what amount does this differ from Junes observed cost for 700 machine hours?

Amount differ$