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Question - Halifax Company incurred the following costs and machine hours for the months of January, February and March.
Cost Item
January
February
March
Insurance
$10,000
Utilities
20,000
30,000
24,000
Maintenance
5,500
5,750
5,600
Machine hours
1,000
1,500
1,200
Required -
a. Assuming that the driver for all costs is machine hours, determine the cost behaviour of each of the three types of costs above. Show calculations.
b. For any mixed costs identified in part a), use the high low method to determine the fixed and variable components of the cost.
c. Using your answers from parts a) and b), construct a total cost estimation equation for Halifax company.
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