The Longreach Toy Factory Has Determined Machine Hours to Be

question 19

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, determine the cost formula that expresses the cost behaviour of the company's electricity costs.

• A) Y = $3735 + $6.20X
• B) Y = $1664 + $8.38X
• C) Y = $4760 + $5.00X
• D) Y = $4400 + $5.50X

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Definitions:

Initial Investments

The initial capital outlay for starting a project, acquiring an asset, or launching a business, typically including costs for equipment, inventory, and facilities.

Capital Budgeting

The process a business undertakes to evaluate and prioritize investments in long-term assets based on their potential to generate income.

Incremental Sales

Sales generated over and above a predefined baseline, often used to measure the effectiveness of sales promotions or new marketing strategies.

Operating Expenses

The costs associated with the normal day-to-day operations of a business, excluding costs directly related to producing goods.