The Arnott Company incurred the following maintenance costs during the past six months: a. The two points that seem to best represent the relationship between cost and activity are the activity levels of 100,000 and 140,000 machine hours. Using these two points, estimate the fixed and variable components of maintenance costs.
b. Develop a cost function that the Arnott Company can use to estimate maintenance cost at different volume levels.
c. Estimate maintenance cost for July if the company expects to use 110,000 machine hours.

Question

The Arnott Company incurred the following maintenance costs during the past six months:  a. The two points that seem to best represent the relationship between cost and activity are the activity levels of 100,000 and 140,000 machine hours. Using these two points, estimate the fixed and variable components of maintenance costs.
b. Develop a cost function that the Arnott Company can use to estimate maintenance cost at different volume levels.
c. Estimate maintenance cost for July if the company expects to use 110,000 machine hours.

Quizplus · Accepted Answer

The Answer of The Arnott Company incurred the following maintenance costs during the past six months:  a. The two points that seem to best represent the relationship between cost and activity are the activity levels of 100,000 and 140,000 machine hours. Using these two points, estimate the fixed and variable components of maintenance costs.
b. Develop a cost function that the Arnott Company can use to estimate maintenance cost at different volume levels.
c. Estimate maintenance cost for July if the company expects to use 110,000 machine hours.

The Arnott Company Incurred the Following Maintenance Costs During the Past