The controller of the South Charleston plant of Ravinia, Inc., monitored activities associated with materials handling costs. The high and low levels of resource usage occurred in September and March for three different resources associated with materials handling.

The number of moves is the driver. The total costs of the three resources and the activity output, as measured by moves for the two different levels, are presented as follows:

Required:
1. Determine the cost behavior formula of each 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 output level of 9,000 moves.
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 materials handling cost if activity output is 9,000 moves. In general, when can cost formulas be combined to form a single cost formula?LO1

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Resource Number of Moves Total Cost Forklift depreciation: Low 6,500 High 20,000 $ 1,800 1,800 Indirect labor: Low 6,500 High 20,000 $ 74,250 135,000 Fuel and oil for forklift: Low 6,500 $ 4,940 High 20,000 15,200