During the past year, the high and low levels of resource usage occurred in May and No¬

vember for three different resources associated with the machining activity. Machine hours is the activity driver. The total costs of the three resources and the activity output, as mea¬

sured by machine hours, for the two different levels are presented as follows;

Required:
1. Determine the cost behavior of each activity input (resource). Use the high-low method to assess the fixed and variable components.
2. Using your knowledge of cost behavior, predict the cost of each item for an activity out¬
put level of 40,000 machine hours.
3. Construct a cost formula that can be used to predict the total cost of the three resources combined. Using this formula, predict the total machining cost if activity outputis 50,000 machine hours. In general, when can cost formulas be combined to form a single cost formula?

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Resource Machine depreciation: Machine Hours Total Cost Low High 20,000 $165,000 75,000 165,000 Power: Low 20,000 1,200 High 75,000 4,500 Maintenance: Low 20,000 19,700 High 75,000 53,800