In your spare time from being a PM you have a side business renting bulldozers.
ID: 2596632 • Letter: I
Question
In your spare time from being a PM you have a side business renting bulldozers. To plan for future rental rates your accountant has summarized the following information. You need to better understand the relationship between operating hours and costs. onth anuarv ebruary Operating Hours 6,400 7,000 6,200 Operating Costs $5,980 $6,400 $5,840 $6,330 $6,820 $6,575 March April 7,600 7,250 une 13) The variable cost per operating hour using the high-low method is a. $1.43. b. $0.70. c. $0.90. d. $0.94. 7,600-G200 1100 690 470 14) Using the high-low method, the fixed costs for a month are a. $980. b. $12,660. 1,500 $5,320. 15) What would be the estimated operating cost if a bulldozer is used for 8,000 hours? a. $7,100. b. $5,600 c. $10,920. d. $1,500.Explanation / Answer
Answer 13.
Highest Operating Cost = $6,820
Highest Operating Hours = 7,600
Lowest Operating Cost = $5,840
Lowest Operating Hours = 6,200
Variable Cost per operating hour = (Highest Operating cost - Lowest Operating cost) / (Highest Operating hours - Lowest Operating hours)
Variable Cost per operating hour = ($6,820 - $5,840) / (7,600 - 6,200)
Variable Cost per operating hour = $0.70
Answer 14.
Fixed Costs = Highest Operating Cost - Highest operating hours * Variable Cost per operating hour
Fixed Costs = $6,820 - 7,600 * $0.70
Fixed Costs = $1,500
Answer 15.
Operating Cost for 8,000 hours = $1,500 + $0.70 * 8,000
Operating Cost for 8,000 hours = $7,100