Maintenance Expenses of a Company Are to Be Analyzed for Purposes

question 13

Multiple Choice

Maintenance expenses of a company are to be analyzed for purposes of constructing a flexible budget. Examination of past records disclosed the following costs and volume measures: $\begin{array}{lrr} & \text { Highest } & \text { Lowest } \\\text { Cost per month } & \$ 86,000 & \$ 74,000 \\\text { Machine hours } & 96,000 & 66,000\end{array}$ Using the high-low technique, estimate the annual fixed cost for maintenance expenditures:

• A) $447,400.
• B) $368,800.
• C) $532,900.
• D) $571,200.
• E) $218,700.

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Definitions:

Representative Heuristic

A mental shortcut used in decision-making, where the likelihood of an event is estimated based on how similar it is to the stereotype of the event.

Correspondent Inference

The process by which observers infer the stable dispositions of others from their observed behavior, particularly when the actions are non-common or unexpected.

Representativeness Heuristic

The tendency to overestimate the likelihood that a target is part of a category if the person has features that seem representative of that category.

Availability Heuristic

A mental shortcut that relies on immediate examples that come to a person's mind when evaluating a specific topic, concept, method, or decision.