Purchase Solution

Developing a cost function by High-Low method

Not what you're looking for?

Ask Custom Question

Machine hours and electricity costs for Wells Industries for 2011 were as follows:

Machine Electricity
Month Hours Costs
January 2,000 $ 9,200
February 2,320 10,500
March 1,520 6,750
April 2,480 11,500
May 3,040 14,125
June 2,640 11,000
July 3,280 12,375
August 2,800 11,375
September 1,600 7,750
October 2,960 13,000
November 3,760 15,500
December 3,360 13,875

Required:

a. Using the high-low method, develop an estimate of variable electricity costs per machine hour.
b. Using the high-low method, develop an estimate of fixed electricity costs per month.
c. Using the high-low method,develop a cost function for monthly electricity costs.
d. Estimate electricity costs for a month in which 3,000 machine hours are worked.

Attachments
Purchase this Solution
Solution Summary

Solution depicts the steps to develop a cost function for electricity costs by using High-Low method.

Solution Preview

Highest level of activity=x2=3760 machine hours
Electricity cost at highest level of activity=y2=$15,500

Lowest level of ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce

Lean your Process

This quiz will help you understand the basic concepts of Lean.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

View More Free Quizzes
Related BrainMass Solutions

  • Developing Cost Function Estimates for the UPS Store Franchise

    Use the methods outlined in the attached file: account classification, high-low, and regression analysis methods. How valid are the cost function estimates that you generated? Which method provided the best estimate? Why?

  • Cost Function Estimates for Bookkeeping Franchise Opportunity

    413852 Cost Function Estimates for Bookkeeping Franchise Opportunity Developing Cost Function Estimates for My Bookkeeping Franchise Opportunity Continue work on your project by developing cost function estimates for your selected franchise opportunity

  • Estimating Cost Functions for Blockbuster and Netflix

    Are there any other methods of estimating cost functions other than the account classification, high-low, and regression analysis methods? In general, which cost function estimation method is likely to be the best and why?

  • High Low Method

    In the high low method we use the highest and the lowest values Type Units Cost High 6,600 5,180 Low 4,900, 4,500 We then take the difference For a units difference of 1,700, the cost increases by 680.

  • Develop a linear equation

    Chapter 3, problem 3-41 High-Low Method Manchester Foundry produced 45,000 tons of steel in March at a cost of £1,150,000. In April, the foundry produced 35,000 tons at a cost of £950,000.

  • High-Low Method

    Using the high-low method, calculate the total fixed factory overhead cost and the variable factory overhead cost per direct labor hour. b. Prepare the cost function. c. What would the total factory overhead cost be at a level of 8,000 hours?

  • High Low Method

    We first find the cost function by taking the high and low costs . High - 26,020 hours 21,000 Low - 22,300 hours 15,000 Take the difference and divide 3720 hours 6,000.

  • Cost estimation :High low method

    function derived using the high-low method, which can be used to estimate the costs of running the cafeteria is: a

  • High-lost linear cost estimation.

    The solution, presented in a Word document, provides detailed guidelines on how to estimate a high-low cost equation. High-low is the cost apportionment used by company's for differentiating cost into either fixed or variable costs.

View More Related Solutions