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.
