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Problem 1
In November 2018, Tri-State Industrial wanted to calculate its predetermined OH utility rate to use in calendar
year 2019. The company gathered information for the prior ten months’ machine hours and utility costs. During
2018, the company’s normal operating range of activity was between 3,500 and 9,000 machine hours per month.
Problem 2
Ibus Instruments Co. developed the following regression equations to indicate costs at various activity levels:
During the next period, the company anticipates production of 20,000 units and usage of 3,000 machine hours.
Required: Prepare a schedule of the production costs to be incurred during the next period.
1
Problem 3
La Mia’s Casas builds replicas of residences of famous and infamous people. The company is highly automated,
and the new accountant-owner has decided to use machine hours as the basis for predicting maintenance costs.
The following data are available from the company’s most recent eight months of operations:
1. Using the high-low method, determine the cost formula for maintenance costs with machine hours as
the basis for estimation.
Problem 4
Tijuana Tile has gathered the following information on its utility cost for the past six months.
Required:
1. Using the high-low method, determine the cost formula for utility cost.
2. Prepare a flexible budget with separate variable and fixed categories for utility cost at 1,325, 1,500 and
1,675 machine hours.