Reference: 18_01
Willco Inc. manufactures electronic parts. They are analyzing their monthly maintenance costs to determine the best way to budget these costs in the future. They have collected the following data for the last six months:
$$\begin{array} { | l | c | c | }
\hline { \text { Month } } & \text { Machine Hours } & \text { Maintenance Costs } \
\hline \text { January } & 30,000 & \$ 62,000 \
\hline \text { February } & 40,000 & \$ 74,500 \
\hline \text { March } & 37,500 & \$ 65,900 \
\hline \text { April } & 39,000 & \$ 68,750 \
\hline \text { May } & 42,300 & \$ 74,000 \
\hline \text { June } & 35,000 & \$ 64,500 \
\hline
\end{array}$$
-If Willco Inc.expects to operate the machines for a total of 32,000 hours in the next month,calculate the expected maintenance costs?

Question

Reference: 18_01
Willco Inc. manufactures electronic parts. They are analyzing their monthly maintenance costs to determine the best way to budget these costs in the future. They have collected the following data for the last six months:
 $$\begin{array} { | l | c | c | } 
\hline  { \text { Month } } & \text { Machine Hours } & \text { Maintenance Costs } \
\hline \text { January } & 30,000 & \$ 62,000 \
\hline \text { February } & 40,000 & \$ 74,500 \
\hline \text { March } & 37,500 & \$ 65,900 \
\hline \text { April } & 39,000 & \$ 68,750 \
\hline \text { May } & 42,300 & \$ 74,000 \
\hline \text { June } & 35,000 & \$ 64,500 \
\hline
\end{array}$$
-If Willco Inc.expects to operate the machines for a total of 32,000 hours in the next month,calculate the expected maintenance costs?

Quizplus · Accepted Answer

Using the high-low method, the variable cost per machine hour is calculated as ($74,500 - $62,000) / (40,000 - 30,000) = $1.25 per hour. The fixed cost is then $62,000 - (30,000 * $1.25) = $24,500. For 32,000 hours, the expected cost is $24,500 + (32,000 * $1.25) = $63,947.

Reference: 18_01 Willco Inc -If Willco Inc

Reference: 18_01
Willco Inc -If Willco Inc