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Question - The controller of Carla Vista Production has collected the following monthly expense data for analyzing the cost behavior of electricity costs.
Total Electricity Costs Total Machine Hours
January $2,650 200
February 3,100 320
March 3,570 450
April 4,750 695
May 3,160 500
June 4,910 750
July 4,130 630
August 3,810 580
September 5,060 680
October 4,390 610
November 3,290 320
December 6,640 770
Required -
What electricity cost does the cost equation estimate for a level of activity of 450 machine hours?
By what amount does this differ from March's observed cost for 450 machine hours?
What electricity cost does the cost equation estimate for a level of activity of 750 machine hours?
By what amount does this differ from June's observed cost for 750 machine hours?
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