Jeff Walker Manufacturing Company Produces Inventory in a Highly Automated

question 162

Essay

Jeff Walker Manufacturing Company produces inventory in a highly automated assembly plant in Newcastle.The automated system is in its first year of operation and management is still unsure of the best way to estimate the overhead costs of operations for budgetary purposes.For the first six months of operations,the following data were collected:
$$\begin{array} { l c c c } & \text { Machine-hours } & \text { Kilowatt-hours } & \text { Total Overhead Costs } \\\text { January } & 3800 & 4520000 & \$ 138000 \\\text { February } & 3650 & 4340000 & 136800 \\\text { March } & 3900 & 4500000 & 139200 \\\text { April } & 3300 & 4290000 & 136800 \\\text { May } & 3250 & 4200000 & 126000 \\\text { June } & 3100 & 4120000 & 120000\end{array}$$
Required:
a.Use the high-low method to determine the estimating cost function with machine-hours as the cost driver.
b.Use the high-low method to determine the estimating cost function with kilowatt-hours as the cost driver.
c.For July,the company ran the machines for 3000 hours and used 4 000 000 kilowatt-hours of power.The overhead costs totalled $114 000.Which cost driver was the best predictor for July?
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Definitions:

Hemolysis

The destruction or rupture of red blood cells, leading to the release of hemoglobin into the surrounding fluid.

Venipuncture

The puncturing of a vein as part of a medical procedure, typically to draw blood or administer medications.

Butterfly Needle

A small, winged needle used for venipuncture or IV injections, designed to minimize patient discomfort.

Serum

Blood plasma in which clotting factors (such as fibrin) have been removed naturally by allowing the blood to clot prior to isolating the liquid component.