ACC

Question 1

ABC company incurred the following maintainance costs during the past 6 months

Table 1

Months	Machine hours	Cost
1	2200	8560
2	1000	4200
3	1200	5920
4	1600	6280
5	1300	4020
6	1900	7020
7	2000	8400
8	2300	9500
9	500	2000

REQUIRED

Question 1

1. Use a scatter graph and the two points that seem to best represent the relationship between cost and activity levels of 1000 and 2000 machine hours. Use these two points , estimate the variable cost and the fixed cost [ components of maintenance costs]

2. Develop a cost function that the company can use to estimate maintenance cost at different volume levels

3. Estimate maintenance costs for July if the company expects to use 2800 machine hours

Question 2

A. Use the data on Table 1 , estimate the variable and fixed cost of the company using the high and low method

B. Develop a cost function for the company.

C. Estimate the maintenance cost if 3000 machine hours were used in July

Question 3

D. Use the data on Table 1 , estimate the variable and fixed cost of the company using the least squares method

E. Develop a cost function for the company.

F. Estimate the maintenance cost if 2500 machine hours were used in July