Castanza Company produces computer printers. Management wants to estimate the cost of production equipment used to produce printers. The company reported the following monthly cost data related to production equipment:

Required

a. Use the four steps of the high-low method to estimate total fixed costs per month, and the variable cost per machine hour (rounded to the nearest cent).
State your results in the cost equation form Y = f + vX.

b. What would Castanza Company’s estimated costs be if it used 50,000 machine hours next month?

c. What would Castanza Company’s estimated costs be if it used 15,000 machine hours next month? Why should you feel uncomfortable estimating costs for 15,000 machine hours?

Transcribed Image Text:

Reporting Period (Month) Total Costs Machine Hours January $ 920,000 45,000 February 600,000 25,000 March 500,000 20,000 April 1,100,000 90,000 May 1,140,000 95,000 June 620,000 30,000 July 880,000 38,000 August 910,000 48,000 September 1,060,000 78,000 October 960,000 51,000 November 1,400,000 96,000 December 980,000 54,000