Month Machine Hours (hrs.) Maintenance Costs ($) 1 1,330 102,694 2 1,400 103,694
ID: 2520763 • Letter: M
Question
Month
Machine Hours (hrs.)
Maintenance Costs ($)
1
1,330
102,694
2
1,400
103,694
3
1,500
108,694
4
1,470
108,694
5
1,620
116,694
6
1,690
115,694
7
1,490
107,694
8
1,310
102,694
9
1,450
106,694
10
1,580
113,694
11
1,300
100,694
12
1,600
113,694
13
1,650
114,694
14
1,440
109,694
15
1,340
102,694
16
1,670
114,694
17
1,480
106,694
18
1,360
103,694
19
1,340
103,694
20
1,540
112,694
Assume that the following relationship holds:
Maintenance Costs = (v * Machine Hours) + f
REQUIRED
Estimate the values of v and f and the cost equation using,
1. the High-Low Method
Make sure to report
1. The values of v and f;
2. A scatter plot of the data points, and
3. The adjusted R-square; explain what the adjusted R-square means.
4. The cost equation in the form of Y = vx + f, substituting the values for v and f from the regression output.
YOUR SUBMISSION MUST BE IN EXCEL.
Month
Machine Hours (hrs.)
Maintenance Costs ($)
1
1,330
102,694
2
1,400
103,694
3
1,500
108,694
4
1,470
108,694
5
1,620
116,694
6
1,690
115,694
7
1,490
107,694
8
1,310
102,694
9
1,450
106,694
10
1,580
113,694
11
1,300
100,694
12
1,600
113,694
13
1,650
114,694
14
1,440
109,694
15
1,340
102,694
16
1,670
114,694
17
1,480
106,694
18
1,360
103,694
19
1,340
103,694
20
1,540
112,694
Explanation / Answer
Answer:
Highest Activity = 1690 units ; maintenance cost = 115694
Lowest Activity = 1300 units ; maintenance cost = 100694
Variable cost per units = ( 115694 - 100694)/(1690-1300) = 15000 / 390 = 38.46
Total Fixed cost = 115694 - ( 38.46 x 1690 ) = 115694 - 64997 = 50697
Cost volume formula : y = $50697 + 38.46x