Please answer the questions (multiple choices) - Bava Company wants to develop a
ID: 423574 • Letter: P
Question
Please answer the questions (multiple choices)
- Bava Company wants to develop a cost function for its maintenance costs to estimate such costs for the coming year. The following data are available:
Month
Direct Labour Hours
Maintenance Costs Incurred
June
4,000
$ 900
July
6,500
$ 1,325
August
7,000
$ 1,500
September
5,500
$ 1,150
a) $1.00
b) $0.10
c) $0.20
d) $1.50
- The cost of ordering is expressed as “Ordering Costs = A/Q x K” where K is:
a) carrying costs of the order
b) lead time required to place the order
c) difference between the number of orders and the quantity of each order
d) cost of placing an order
Month
Direct Labour Hours
Maintenance Costs Incurred
June
4,000
$ 900
July
6,500
$ 1,325
August
7,000
$ 1,500
September
5,500
$ 1,150
Explanation / Answer
Answer:1
Using High-Low Method
Mainteanance Cost= (Maintenance Costs Incurred)/ (Direct Labour Hours)
= (1500-900)/ (7000-3000)
= 600/3000
=1/5 = $0.20
Option (C)
Answer:2
Option (A) carrying costs of the order