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STANLEY Company is in the process of preparing its cost budget for 2022 and management is trying to estimate the monthly hydro costs. They have

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STANLEY Company is in the process of preparing its cost budget for 2022 and management is trying to estimate the monthly hydro costs. They have compiled the most recent twelve months of hydro costs incurred as well as machine hours worked. It has been determined that machine hours is the most appropriate cost driver activity for hydro costs. Hydro Cost (activity level) Machine Hours January 2021 February 2021 March 2021 April 2021 May 2021 June 2021 July 2021 August 2021 September 2021 October 2021 November 2021 December 2021 $ 16,100 $ 18,700 $ 16,700 $ 15,500 $ 16,500 $ 12,400 $ 16,100 $ 16,350 $ 13,100 $ 14,300 $ 18,100 $ 16,850 2,800 3,280 2,920 2,600 2,880 1,840 2,760 2,840 1,640 2,320 3,400 2.960 1.) Using the High-Low Method, derive and present the cost function for Hydro Cost with Machine Hours as the cost driver activity. (Your cost function must show appropriate descriptions .... meaning... do not use "X" and "Y" in your final cost function). (Round all per unit" amounts to 3 decimal places, if applicable, and all dollar amounts to the nearest dollar.) (6 marks) 2.) (a) Management believes that the upcoming month of January 2022 is going to be the busiest month in the business' history and it is projected that a total of 4,000 machine hours will be used and 1,000 direct labour hours will be worked. Using the cost function you have derived in requirement 1, calculate the estimated hydro cost for January 2022. (Round to the nearest dollar) (b) Assuming that your cost function derived in requirement 1 is proven to be an excellent representation (ie an excellent fit) of all historical data, how reliable is your cost estimate calculated in requirement 2(a)? Explain. (4 marks) 3.) In terms of its behavior, what type of cost is hydro cost of Stanley Company? (1 mark) 4.) Identify one(1) other method that could have been used to derive a cost function for this cost. (Do not provide a calculation) (1 mark)

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