27) Birch Canvas and Tarp manufactures canvas products in a highly automated assembly plant in Edmonton, Alberta. Their automated system is in its first year of operation, and management is still unsure of the best way to estimate the overhead costs of operations for budgetary purposes. For the first six months of operations the following data were collected:
ObservationMachine-hoursKilowatt-hoursTotal Overhead Costs
a.Compute a cost estimating equation for each predictor variable (machine-hours and kilowatt-hours) using the high-low method.
b.For July the company ran the machines for 1,600 hours and used 2,075,000 kilowatt hours of power. The overhead costs totalled $95,000. Which driver was the best predictor for July?
28) The Wildcat Company has provided the following information for the factory overhead cost pool:
Units of Output30,000 Units42,000 Units
Utilities 384,000 528,000
Using the high-low method and the information provided above,
a.identify the linear cost function equation and
b.estimate the total cost at 36,000 units of output.
29) Patrick Ross, the president of Ross’s Wild Game Company, has asked for information about the cost behaviour of manufacturing overhead costs. Specifically, he wants to know how much overhead cost is fixed and how much is variable. The following data are the only records available:
Using the high-low method, determine the overhead cost equation. Use machine-hours as your cost driver.