The Longreach Toy Factory Has Determined Machine Hours to Be

question 33

Multiple Choice

The Longreach Toy Factory has determined machine hours to be the cost driver of the company's electricity costs. During the first six months of the year, the company incurred the following electricity costs:
Using the high-low method, estimate the variable cost per machine hour.

• A) $8.38
• B) $7.44
• C) $5.50
• D) None of the given answers

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Definitions:

Direct Expenses

Costs that can be directly attributed to the production of goods or services, such as raw materials and direct labor.

Direct Expense

Costs directly attributable to the production of goods or services, such as materials and labor.

Indirect Expense

Costs that are not directly traceable to a specific product, service, or department, but are necessary for the business to operate.

Total Direct Cost

The sum of all direct costs associated with the production of goods or the provision of services, including direct materials and direct labor.