Lewisa Company Needs to Determine the Variable Utilities Rate Per

question 31

Essay

Lewisa Company needs to determine the variable utilities rate per machine hour in order to estimate cost for August. Relevant information is as follows. $\begin{array}{llr}& \text { Machine } \\& \text { Hours } & \text { Utilities } \\\text { Month } & \text { Worked } & \text { Cost }\\\text { April } & 4,500 & \$ 9,560 \\\text { May } & 4,200 & 9,440 \\\text { June } & 6,500 & 10,725 \\\text { July } & 7,000 & 11,400\end{array}$
Lewisa anticipates producing 5,000 units in August, each unit requiring 1.5 hours of machine time. The company uses the high-low method to analyze costs.
Required:
A. Calculate the variable and fixed components of the utilities cost.
B. Using the data calculated above, estimate the utilities cost for August.
C. Compare the high-low method versus the visual-fit method with respect to (1) number of data observations used in the analysis and (2) objectivity of the results.

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Definitions:

Sign Stimuli

External sensory cues that trigger a fixed action pattern or innate behavioral response in an animal.

Innate Releasing Mechanisms

Biological processes or structures that trigger specific behaviors in response to certain stimuli.

Environmental Stimuli

External factors or conditions in the environment that can elicit responses or reactions from organisms.

William McDougall

A psychologist known for his work in social psychology and the concept of instinct theory of motivation.