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The accountants at XZ Manufacturing Company are trying to calculate a cost function for maintenance costs in order to plan for next years maintenance cost.
The accountants at XZ Manufacturing Company are trying to calculate a cost function for maintenance costs in order to plan for next years maintenance cost. They collect the following data for the last complete calendar year. Maintenance costs Units produced Machine hours January $ 1,800 500 2,500 February $ 2,740 600 3,200 March $ 2,930 1,000 3,300 April $ 3,640 850 3,500 May $ 3,410 1,050 3,800 June $ 3,100 600 3,700 July $ 2,320 500 2,600 August $ 2,600 650 2,950 September $ 1,320 640 3,100 October $ 2,800 800 3,350 November $ 2,320 950 3,650 December $ 1,870 320 2,400 REQUIRED: 1. Help the accountants decide which is the best cost driver for maintenance costs. Use an appropriate technique of your choice to make this decision. (2 marks) 2. Calculate the maintenance cost function using an appropriate technique. Write the cost function in the form Y = a + bX. (2 marks) 3. If the accountants expect a production volume of 650 units and 3,600 machine hours in the coming month, how much maintenance costs would you expect? (1 mark) Show your calculations
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