Question
The controller of Crane Production has collected the following monthly expense data for analyzing the cost behavior of electricity costs. Total Electricity Costs Total Machine
The controller of Crane Production has collected the following monthly expense data for analyzing the cost behavior of electricity costs.
| Total Electricity Costs | Total Machine Hours | |||||||
| January | $2,480 | 230 | ||||||
| February | 2,930 | 370 | ||||||
| March | 3,520 | 460 | ||||||
| April | 4,620 | 685 | ||||||
| May | 3,190 | 420 | ||||||
| June | 4,960 | 790 | ||||||
| July | 4,060 | 620 | ||||||
| August | 3,870 | 550 | ||||||
| September | 5,090 | 670 | ||||||
| October | 4,370 | 605 | ||||||
| November | 3,360 | 370 | ||||||
| December | 6,540 | 810 | ||||||
A. Determine the fixed- and variable-cost components using the high-low method.
B. What electricity cost does the cost equation estimate for a level of activity of 460 machine hours? By what amount does this differ from Marchs observed cost for 460 machine hours?
C. What electricity cost does the cost equation estimate for a level of activity of 790 machine hours? By what amount does this differ from June's observed cost for 790 machine hours?
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