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Hybrid Company produces hybrid engines in a highly automated assembly plant. The automated system is in its first year of operation and thus management is
Hybrid Company produces hybrid engines in a highly automated assembly plant. The automated system is in its first year of operation and thus management is still unsure of the best way to estimate the overhead costs of operations for budgetary purposes. For the first six months of operations, the following data were collected: January February March April Machine-hours Total Overhead Costs 3,800 $140,000 3,650 136,800 4,000 138,000 3,300 136,800 3,250 126,000 3,000 120,000 May June 3. (a) Using the high-low method with machine-hours as the cost driver, what is the estimate of Hybrid's overhead cost function? (b) Which months' data should the cost function be based on? ABC Ltd. produces its first unit using 250 direct labor hours. 4. How many hours will it take ABC Ltd. to produce the second unit if their production follows the cumulative average time learning model and assumes a learning % of 85%
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