Reference no: EM132908979

Question - Manama Company manufactures major appliances. Because of growing interest in its products, it has just had its most successful year. In preparing the budget for next year, its controller compiled the following information:

Month Volume in Machine hours Elect. Cost

July 3,500 $13,400

August 3,200 13,500

September 4,100 16,000

October 5,100 18,300

November 5,300 18,200

December 4,800 17,500

Required -

1- Using the high-low method, determine the variable electricity cost per machine hour and the monthly fixed electricity cost. Estimate the total variable electricity costs and fixed electricity costs if 4600 machine hours are projected to be used next month.

2- Using the scatter diagram method, determine the variable electricity cost per machine hour and the monthly fixed electricity cost. Estimate the total variable electricity costs and fixed electricity costs if 4600 machine hours are projected to be used next month. (You should use Excel to graph the data. Copy your chart and paste below).

3- Which Cost estimation method more accurate; the high low method or the scatter diagram method? Explain your answer.