Wimmer's Storage Ran Its Freezer in February, a Slow Month

question 149

Essay

Wimmer's Storage ran its freezer in February, a slow month, for 360 hours for a total cost of $57,600. In July, a peak month, the freezer ran for 720 hours for a total cost of $82,080.
Required:
a. What is the cost estimating equation for the department if hours of freezer use are used as the cost driver?
b. What is the estimated total cost at an operating level of 500 hours?

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Definitions:

Health Insurance

A type of insurance coverage that pays for medical and surgical expenses incurred by the insured or reimburses the insured for expenses incurred from illness or injury.

Performance Compensation

A pay system where employees' remuneration is directly linked to their performance or the outcomes they achieve.

Employees' Control

The extent to which workers have power or influence over their work environment and decision-making processes.

Variable Salary

A compensation structure where a portion of an employee's pay is based on some form of performance measure, leading to fluctuations in earnings.