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

= $