Using Activity Analysis,Arnoldson Company Has Identified the Appropriate Cost Driver

question 126

Essay

Using activity analysis,Arnoldson Company has identified the appropriate cost driver for maintenance costs in a factory as the number of machine hours.The maintenance costs have been observed as follows within the relevant range of 5,000 to 8,000 machine-hours.
$\begin{array}{lll}\text { Month }&\text { Maintenance Cost }&\text { Machine Hours }\\\text { January } & \$ 7,900 & 5,600 \\\text { February } & \$ 8,500 & 7,100 \\\text { March } & \$ 7,400 & 5,000 \\\text { April } & \$ 8,200 & 6,500 \\\text { May } & \$ 9,100 & 7,300 \\\text { Iune } & \$ 9,800 & 8,000 \\\text { July } & \$ 7,800 & 6,200\end{array}$
Required:
1.Estimate the cost function using the high-low method.
2.If you were going to use the visual-fit method to estimate the cost function,what steps will you take?

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