Viscount Corporation has a machining capacity of 200,000 hours per year.Utilization of capacity is normally 75%; it
Question:
Viscount Corporation has a machining capacity of 200,000 hours per year.Utilization of capacity is normally 75%; it has been as low as 40% and as high as 90%.An analysis of the accounting records revealed the following selected costs:
At a 40%
Utilization Rate
At a 90%
Utilization Rate
Cost A:
Total
$440,000
$440,000
Per hour
$5.50
?
Cost B:
Total
?
$1,944,000
Per hour
$10.80
$10.80
Cost C:
Total
$680,000
$1,330,000
Per hour
$8.50
$7.39
Viscount uses the high-low method to analyze cost behaviour.
REQUIRED:
A. Classify each of the costs as being either variable, fixed, or semi-variable.
B. Calculate amounts for the two unknowns in the preceding table.
C. Calculate the total amount that Viscount would expect at a 75% utilization rate for Cost A, Cost B, and Cost C.
D. Develop an equation that Viscount can use to predict total cost for any level of hours within its range of operation.