The following information is available for electricity costs for the first six months of the year. MonthProduction VolumeElectricity Cost January2,800$2,100 February5,6003,600 March6,4003,800 April3,5002,600 May2,4001,600 June4,2002,700 Using the high-low method, an estimate of electricity costs at 3,000 units of production would be:Question 7Select one:a.$1,930b.$2,050c.$2,372d.$3,730
Question
The following information is available for electricity costs for the first six months of the year. MonthProduction VolumeElectricity Cost January2,8001,930b.2,372d.$3,730
Solution
To solve this problem using the high-low method, we first need to identify the highest and lowest levels of activity and their associated costs.
From the data given, the highest level of activity is in March with 6,400 units of production and a cost of 1,600.
The high-low method calculates the variable cost per unit first, which is the change in cost divided by the change in activity level.
So, the variable cost per unit = (High cost - Low cost) / (High activity level - Low activity level)
= (1,600) / (6,400 units - 2,400 units)
= $2,200 / 4,000 units
= $0.55 per unit
Next, we calculate the fixed costs by subtracting the total variable costs at either the high or low level of activity from the total cost at that activity level.
So, Fixed cost = High cost - (Variable cost per unit * High activity level)
= 0.55 * 6,400 units)
= 3,520
= $280
Now that we have the variable cost per unit and the fixed costs, we can estimate the electricity costs at 3,000 units of production.
Estimated cost = (Variable cost per unit * Activity level) + Fixed cost
= (280
= 280
= $1,930
So, the answer is a. $1,930.
Similar Questions
The following information was available about supplies cost for the first three months of the year. MonthProduction VolumeSupplies Cost January1,400$ 6,370 February3,200$14,200 March1,200$ 5,400 Using the high-low method, an estimate of supplies cost at 3,000 units of production would be:Question 6Select one:a.$13,050b.$13,200c.$13,320d.$13,330
The following data pertain to activity and utilities costs for two recent years: Year 2 Year 1Activity Level in Units 12,000 8,000Utilities Cost $15,000 $12,000Using the high-low method, what is the variable cost per unit for utilities?Multiple Choice$1.25 per unit.$1.50 per unit.$1.33 per unit.$0.75 per unit.
Hydropower is a clean source of renewable energy that can also be cheap: it doesn’t require any raw materials to run, meaning the operating costs are low. On average, how much did it cost to produce 1 kWh (kilowatt-hour) of electricity from hydropower in 2018?$0.047$0.47$4.7
During its first month of operations, a manufacturer incurs the following costs in dollars related to activities within its factory:Direct materials costs $5,000Indirect materials $2,000Direct labor $15,000Indirect labor $3,000Factory rent $10,000Depreciation on factory equipment $8,000What are the manufacturer’s total product costs for the month?
Electrical equipment in an office takes a current of 13 A from a 240 V supply. Estimate the cost per week of electricity if the equipment is used for 30 hours each week and 1 kWh of energy costs 7pQ.17. An el
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.