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The controller of Gutierrez Industries has collected the following monthly expense data for use in analyzing the cost behaviour of maintenance costs: Month Total Maintenance
The controller of Gutierrez Industries has collected the following monthly expense data for use in analyzing the cost behaviour of maintenance costs:
Month | Total Maintenance Costs | Total Machine Hours | |||||
January | $2,750 | 3,500 | |||||
February | 3,000 | 4,000 | |||||
March | 3,600 | 6,000 | |||||
April | 4,500 | 7,900 | |||||
May | 3,200 | 5,000 | |||||
June | 5,000 | 8,000 |
(a) Determine the fixed and variable cost components using the high- low method.
(b) Prepare a graph showing the behaviour of maintenance costs, and identify the fixed and variable cost elements. Use 2,000-hour increments and $1,000 cost increments.
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