a mathxl.com Do H ACG 2071 Fall 2017 jennifer sanchez & 11/2/17 2:43 PM Homework

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a mathxl.com Do H ACG 2071 Fall 2017 jennifer sanchez & 11/2/17 2:43 PM Homework: Ch. 8 Cost Behavior Score: 0 of 1 pt E6-23A (similar to) 3 of 6 (0 complete) Hw Score: 0%, 0 of 6 pts EQuestion Help Reynolds Company, which uses the high-low method to analyze cost behavior, has determined that machine hours best predict the company's total utilies cost. The company's cost and machine hour usage data for the first six months of the year follow click the icon to view the data.) Requirements Using the high-low method, answer the following questions: 1. What is the variable utilities cost per machine hour? 2. What is the fixed cost of utilities each month? 3. If Reynolds Company uses 1,270 machine hours in a month, what will its total costs be? Requirement 1. What is the variable utilities cost per machine hour? Let's begin by determining the formula that is used to calculate the variable cost (slope) variable cost (slope) Choose from any drop-down list and then click Check Answer Clear All

Explanation / Answer

ans)

1) Variable utilities cost per machine hour = $1.8

Change in cost / change in volume = Variable cost (slope)

Take the highest cost driver (machine hours) and it's total cost. Subtract the lowest cost driver and its total cost.

1430 - 1030 = 400 hours

4294 - 3574 = 720

720 / 400 = $1.8

2) Fixed cost of utilities each month = 1720

To get the fixed costs, use either one of the following formulas (they both will give you the same answer)

High Cost - (Variable Cost x High Machine Hours) = Fixed Costs
Low Cost - (Variable Cost x Low Machine Hours) = Fixed Costs

4294 - ( 1.8 X 1430) = 1720

3574 - ( 1.8 X 1030) = 1720

3) If Reynolds company uses 1270 Machine hours in a month , thden its total cost = 4006

Variable cost = 1270 x 1.8 = 2286

Fixed cost = 1720

Total cost = 4006

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