Question
SullivanSullivan Corporation wants to find an equation to estimate some of their monthly operating costs for the operating budget for 2018. The following cost and
SullivanSullivan
Corporation wants to find an equation to estimate some of their monthly operating costs for the operating budget for 2018. The following cost and other data were gathered for 2017
| Maintenance | Machine | Health | Number of | Shipping | Units |
Month | Costs | Hours | Insurance | Employees | Costs | Shipped |
January | $4,590 | 169 | $8,560 | 64 | $26,418 | 7,140 |
February | $4,414 | 110 | $8,560 | 76 | $30,340 | 8,200 |
March | $4,655 | 239 | $8,560 | 94 | $29,489 | 7,970 |
April | $4,890 | 310 | $8,560 | 103 | $23,865 | 6,450 |
May | $5,170 | 470 | $8,560 | 90 | $21,756 | 5,880 |
June | $4,745 | 281 | $8,560 | 85 | $34,114 | 9,220 |
July | $4,958 | 343 | $8,560 | 94 | $32,449 | 8,770 |
August | $4,941 | 365 | $8,560 | 92 | $31,154 | 8,420 |
September | $5,025 | 423 | $8,560 | 101 | $24,975 | 6,750 |
October | $5,233 | 472 | $8,560 | 108 | $26,529 | 7,170 |
November | $5,410 | 525 | $8,560 | 96 | $20,424 | 5,520 |
December | $4,795 | 281 | $8,560 | 100 | $35,483 | 9,590 |
Requirement 1. Which of the preceding costs is variable? Fixed? Mixed? Explain.
Cost | ||
Cost | function | Explanation |
Maintenance | Fixed |
|
Health insurance |
|
|
Shipping costs |
|
|
Requirement 2. Using the high-low method, determine the cost function for each cost.
Begin by selecting the general formula that represents the linear cost function for each cost.
Maintenance |
|
Health insurance |
|
Shipping costs |
|
Now determine the cost function for each cost. (Enter all values in the same format as the general linear formula. If a box is not used in the equation, leave the box empty; do not enter a zero or select a label.)
Cost function |
|
|
|
| |
Maintenance | y = |
| + |
|
|
Health insurance | y = |
| + |
|
|
Shipping costs | y = |
| + |
|
|
Requirement 3. Combine the preceding information to get a monthly operating cost function for the
SullivanSullivan
Corporation.
Monthly |
|
|
|
|
| |||
operating cost | = |
| + |
|
| + |
|
|
Requirement 4. Next month,
SullivanSullivan
expects to use
470
machine hours, have
95
employees, and ship
8,500
units. Estimate the total operating cost for the month.
Monthly operating cost | = $ |
|
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