27) Lichtenstein Imports needs to determine the variable utilities rate per machine hour in order to...

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Accounting

27) Lichtenstein Imports needs to determine the variableutilities rate per machine hour in order to estimate cost forAugust. Relevant information is as follows.
Month Machine Hours Worked Utilities Cost
April 4,500 $9,560
May 4,200 $9,440
June 6,500 $10,725
July 7,000 $11,400
Lichtenstein anticipates producing 5,000 units in August, eachunit requiring 1.5 hours of machine time.
The company uses the high-low method to analyze costs.
Required:
A. Calculate the variable and fixed components of the utilitiescost.
B. Using the data calculated above, estimate the utilities costfor August.
C. Compare the high-low method versus the visual-fit method withrespect to (1) number of data observations used in the analysis and(2) objectivity of the results.

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Solution The company uses the highlow method to analyze costs Machine hours Total costs High activity level july 7000 11400 Low activity level may 4200 9440 Differece 2800 1960 Answer A The variable and fixed components of the See Answer

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