Windsor Company Incurred the Following Costs and Machine Hours During

question 3

Essay

Windsor Company incurred the following costs and machine hours during the first three months of the current year. Assume that the driver for all costs is machine hours.
Type of cost January February March
Electricity $20,000 $15,000 $18,000
Depreciation 15,000 15,000 15,000
Factory supplies 9,600 5,600 7,600
Property taxes 12,000 12,000 12,000
Machine hours 1,200 700 950
Required:
A. Using the high-low method, construct a cost formula for electricity cost.
B. If Windsor had total costs in April of $53,000, using the high-low method, what would be the best-guess of how many machine hours they incurred during April?
C. If Windsor expects to incur 1,500 machine hours in May, using the high-low method, what would be the estimate of their total costs?

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Definitions:

Equity Method

An accounting technique used by companies to record their investments in other companies, where the investment gives the investor significant influence over the investee, but not control or full ownership.

Additional Paid-in Capital

The excess amount over the par value that shareholders pay when shares are issued, recorded in the equity section of the balance sheet.