Bava Company Wants to Develop a Cost Function for Its

question 20

Multiple Choice

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: $\begin{array}{llr}& \text { Direct } & \text { Maintenance } \\\text { Month } & \text { Labour Hours } & \text { Costs Incurred }\\\text { June } & 4,000 & \$ 900 \\\text { July } & 6,500 & 1,325 \\\text { August } & 7,000 & 1,500 \\\text { September } & 5,500 & 1,150\end{array}$ Using the high-low method, what is the fixed maintenance cost?

• A) $500
• B) $300
• C) $200
• D) $100

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Definitions:

Conversion Costs

The costs incurred to convert raw materials into finished products, typically including labor and overhead expenses.

Work In Process

Inventory that includes goods partially through the production process but not yet completed.

Weighted Average

A calculation that takes into account the varying significance of different data points, more heavily influencing the average with more important or larger values.

FIFO

An inventory valuation method where the first items produced or purchased are the first ones considered sold, standing for "First-In, First-Out."