Estimate the variable cost per machine-hour

Reference no: EM132835173

Question - Smead, Inc. has provided the following data concerning its maintenance costs. Management believes that maintenance cost is a mixed cost that depends on Machine-hours. Estimate the variable cost per machine-hour, the fixed cost per month using the high-low method, show the resulting high/low equation and estimate maintenance costs if machine hours were 5,900 hours. How do you know the result of your calculation for 5,900 hours is reasonable? Show all of your work in order to earn full points!

	Machine-Hours	Maintenance Cost
April	5,799	$30,379
May	5,782	$30,289
June	5,764	$30,237
July	5,761	$30,233
August	5,717	$30,078
September	5,795	$30,360
October	5,809	$30,388
November	5,801	$30,378
December	5,785	$30,318

Required -

1. Estimate the variable cost per machine-hour (since this is in dollars and cents, round to two decimal places).

2. Estimate the fixed cost per month using the high-low method (round this amount to the nearest dollar).

3. Show the resulting high/low equation.

4. Estimate maintenance costs if machine hours were 5,900 hours, rounding to the nearest dollar.

5. How do you know the result of your calculation for 5,900 hours is reasonable?

Reference no: EM132835173

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