Please show work. Morgan Co. gathered the following information on power costs a
ID: 2546705 • Letter: P
Question
Please show work.
Morgan Co. gathered the following information on power costs and factory machine usage for the last six months: Month July August September October November December Electricity Cost Factory Machine Hours $24,400 29,200 29,000 22,340 19,900 14,900 13,900 17,600 16,800 13,200 11,600 6,600 Instruction Using the high-low method of analyzing costs, answer the following questions and show computations to support your answers. (a) What is the estimated variable portion of power costs per factory machine hour? (b) What is the estimated fixed power cost each month? (c) If it is estimated that 10,000 factory machine hours will be run in January of the next year, what is the expected total power cost for January?Explanation / Answer
Electricity Cost = Hi $ 29,200 - Lo $14,900 = $ 14,300 slope
Factory Machine hours = Hi 17,600 - Lo 6,600 = 11,000 slope
(a) Estimated Variable Portion of Power Costs per factory machine hours
= $ 14,300 / 11,000 = $ 1.30 per Mach Hr
b) Estimated Fixed Power costs
At Hi - 17,600 MHr x 1.30 = 22,880 + FC = 29,200. FC = 6320
At Lo - 6,600 MHr x 1.30 = 8,580 + FC = 14,900, FC = 6320
c) Estimated total power cost of January
10,000 MHr x 1.30 = 13,000 + 6320 = 19,320