QUESTION 3(i)

Samuel Amo Tobin, the Executive of Tobinco Pharmaceutical Co., has asked for information about the cost behaviour 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

1400

$12,500

June

1750

$13,500

July

1000

$7,900

August

850

$9,000

September

1250

$11,000

a. Find the monthly fixed support cost and variable support cost per machine hour using the high-low method.

b. Develop the support cost function of Tobinco Pharmaceutical Co.

c. Estimate the support cost if the machine hours are

i. 3500 hours

ii. 5070 hours