Davidson Engine Repairs provides maintenance and repair serv

Davidson Engine Repairs provides maintenance and repair services for small engines such as those found in lawn mowers, power saws, and snow throwers. The repair shop costs include the salaries for the mechanics, insurance and depreciation on the repair equipment, materials and parts used for the jobs, and utilities. The repair shop manager would like to develop a model for predicting repair costs and over the past 10 months has carefully recorded the total repair costs incurred, along with the number of maintenance and repair jobs completed each month. The data are shown below: Month January February March Jobs Repair Costs 242 284 $41,395 250 $37,950 246 $36,840 313 278 $40,120 217 $33,660 193 $28,990 $36,610 ril $44,340 May June August September 163 $25,275 October 116 $18,730 Required 1. Not available in Connect. 2. Using the high-low method, estimate a cost formula for repair costs. Express the formula in the form Y= a + bX.

Solution

Solution :- Variable cost per unit = (Total cost at highest level of activity - Total cost at lowest level of activity) / (Number of jobs at highest level of activity - Number of jobs at lowest level of activity)

= (44340 - 18730) / (313 - 116)

= 25610 / 197

= 130.

Total fixed cost = 44340 - (130 * 313)

= 44340 - 40690

= $ 3650.

Conclusion :-

Cost formula

Y = 3650 + 130X.