Question
Q5: ManamaCompany manufactures major appliances. Because of growing interest in its products, it has just had its most successful year. In preparing the budget for
Q5: ManamaCompany manufactures major appliances. Because of growing interest in its products, it has just had its most successful year. In preparing the budget for next year, its controller compiled the following information:
Month
Volume in Machine hours
Elect. Cost
July
3,500
$13,400
August
3,200
13,500
September
4,100
16,000
October
5,100
18,300
November
5,300
18,200
December
4,800
17,500
Required:
1-Using the high-low method, determine the variable electricity cost per machine hour and the monthly fixed electricity cost. Estimate the total variable electricity costs and fixed electricity costs if 4600 machinehours areprojected to be used nextmonth.[4 Marks]
2- Using the scatter diagram method,determine the variable electricity cost per machine hour and the monthly fixed electricity cost. Estimate the total variable electricity costs and fixed electricity costs if 4600 machine hours are projected to be used next month.(You should useExcel to graph the data. Copy your chart and paste below). [4 Marks]
3- Which Cost estimation method more accurate; the high low method or the scatter diagram method? Explain youranswer.[2 Marks]
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