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Holmes Ltd. has recorded the following costs: Month Units produced Cost A Cost B Cost C January 12,000 $72,000 $85,000 $32,000 February 9,000 54,000 80,000
Holmes Ltd. has recorded the following costs: Month Units produced Cost A Cost B Cost C January 12,000 $72,000 $85,000 $32,000 February 9,000 54,000 80,000 32,000 March 14,000 84,000 87,000 32,000 Instructions (Show your work): a) If Holmes Ltd. produces 13,500 units in April, what would be the expected total cost for each of Cost A, Cost B and Cost C? (If the cost is a mixed cost, use the high-low method to determine April's cost.) (6 Marks) b) Holmes Ltd. expects to build a new factory that has significantly more automation. They project the average monthly units produced will rise to 20,000 units. Should Holmes continue to use the costs formulas computed in Part a)? Why or why not? (1 Mark)
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