TranCompany which uses the highlow method to analyze cost be

Tran?Company, which uses the? high-low method to analyze cost? behavior, has determined that machine hours best predict the?company\'s total utilities cost. The? company\'s cost and machine hour usage data for the first six months of the year? follow:

Month Total Cost Machine Hours

January.........$3,460...................1,090

February.........$3750.....................1140

March..............$3711......................1060

April.................$3750...................1220

May.................$4600......................1340

June..................$4414..................1440

Requirements        

Using the? high-low method, answer the following? questions:

1.

What is the variable utilities cost per machine? hour?

2.

What is the fixed cost of utilities each? month?

3

Requirement 1. What is the variable utilities cost per machine? hour?

?Let\'s begin by determining the formula that is used to calculate the variable cost? (slope).

/

=

Variable cost (slope)

Using the? high-low method, answer the following? questions:
1.	What is the variable utilities cost per machine? hour?
2.	What is the fixed cost of utilities each? month?
3	If TranCompany uses 1,200 machine hours in a? month, what will its total costs? be?

Solution

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Cost at highest level of activity           4,414.00 Cost at Lowest level of activity           3,711.00 Highest level of activity           1,440.00 Lowest Level of activity           1,060.00 Variable cost per unit = (4414 - 3711)/(1440 - 1060) Variable cost per unit = 703/380 Variable cost per unit = $1.85 Fixed Costs = 4414 - 1440*1.85 Fixed Costs = 4414 - 2,664 Fixed Costs = 1,750 3) 1,200 Machine hours Total Costs = 1750 + 1200*1.85 Total Costs = 3,970