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High-Low Method. Castanza Company produces computer printers.

High-Low Method. Castanza Company produces computer printers. Management wants to estimate the cost of production equipment used to produce printers. The company reported the following monthly cost data related to production equipment:
Reporting Period (Month)Machine HoursTotal Costs
January45,000$   920,000
February25,000600,000
March20,000500,000
April90,0001,100,000
May95,0001,140,000
June30,000620,000
July38,000880,000
August48,000910,000
September78,0001,060,000
October51,000960,000
November96,0001,400,000
December54,000980,000
Required:
1. Use the high-low method to estimate total fixed costs per month and the variable cost per machine hour. State your results in the cost equation form Y = f + vX by filling in the dollar amounts for f and v. 
[Hint:  Watch the video lecture on “mixed cost calculations” before you attempt this problem.]
High Low Y = f + vX   Unlocked work area
 High  Low DifferenceSlope  
Total Costs     
Machine Hours      
  
Y =f +v *X  
      
** Solve for f  
  
Y =f +v *X  
 Y    X   
** Solve for Y     
  
2. What would Castanza Company’s estimated costs be if it used 50,000 machine hours next month?  
  
Y =f +v *X  
 Y      
 Y      
    
** Solve for Y     
  
3. What would Castanza Company’s estimated costs be if it used 15,000 machine hours next month? Why should you feel uncomfortable estimating costs for 15,000 machine hours?  
  
Y =f +v *X  
 Y      
 Y      
    
** Solve for Y        
Answer Here:
Regression Analysis. The city of Rockville reported the following annual cost data for maintenance work performed on its fleet of trucks.
Reporting Period (Year)Total CostsLevel of Activity (Miles Driven)
Year 1750,000225,000
Year 2850,000240,000
Year 31,100,000430,000
Year 41,150,000454,000
Year 51,250,000560,000
Year 61,550,000710,000
Required:
1. Use the regression slope / intercept formulas to develop the cost equation Y = f + vX. 
[Hint:  Watch the video lecture on “mixed cost calculations” before you attempt this problem.]
Unlocked work area
  
Regression Analysis    
  
Slope  
   
Intercept  
   
  
Y =f +v *X  
 Y    X   
** Solve for Y     
  
2. What would the city of Rockville’s estimated costs be if its trucks drove 500,000 miles in year 7?  
  
Y =f +v *X  
 Y      
 Y      
    
** Solve for Y     
     

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