The Perfect Peach Company incurred the following monthly utility costs last year
ID: 2565288 • Letter: T
Question
The Perfect Peach Company incurred the following monthly utility costs last year: Pounds of Month January February March April May June July August September October November December Peaches Cann 14,000 9,000 8,000 10,000 13,000 11,000 7,000 6,000 5,000 3,000 8,000 10,000 Cost S 7,200 4,500 4,300 5,000 6,500 5,500 3,500 3,200 3,400 2,250 4,200 4,900 REQUIRED 1. Use the high-low method to estimate the company's utities cost behavior and state the cost formula. 2. Predict the utlities cost for a month in which 15,000 pounds of peaches were canned.Explanation / Answer
Month Purchase of Pounds canned Cost January 14,000 7,200 February 9,000 4,500 March 8,000 4,300 April 10,000 5,000 May 13,000 6,500 June 11,000 5,500 July 7,000 3,500 August 6,000 3,200 September 5,000 3,400 October 3,000 2,250 November 8,000 4,200 December 10,000 4,900 Using High Low method Variable Cost per unit (High Cost - low Cost)/ (High Cost Units - low Cost Units) Variable Cost per unit (7200-2250)/(14000-3000) Variable Cost per unit 0.45 Fixed Cost Total Cost - No. of Units*Variable Cost per unit Fixed Cost 7200-14000*0.45 900 Formula 1 Suppose Units is A 900+A*.45 2 Cost for 15000 units 7650
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