3 A2 Division of Mixed Costs into Variable and Fixed Components

Molly Flutie, president of First Tool, Co., has asked for information about the cost behavior of manufacturing support costs. Specifically, she wants to know how much support cost is fixed and how much is variable. The following data are the only records available:

Month	Machine Hours	Support Costs
May	1,700	$ 22,000
June	1,600	21,000
July	1,500	19,500
August	1,400	18,500
September	1,300	18,000

1. Find monthly fixed support cost and the variable support cost per machine hour by the high-low method.
2. Explain how your analysis for requirement 1 would change if new October data were received and machine hours were 1,650 and support costs were $24,000.
3. A least-square regression analysis gave the following output:

Regression equation: Y = $4,050 + 10.50X

What recommendations would you give the president based on these analyses?