Vargis Corporation has a machining capacity of 200,000 hours per year. Utilization of capacity is normally 75%; it has been as low as 40% and as high as 90%. An analysis of the accounting records revealed the following selected costs:

Vargis uses the high-low method to analyze cost behavior.
Required:
A. Classify each of the costs as being either variable, fixed, or semivariable.
B. Calculate amounts for the two unknowns in the preceding table.
C.
C. Calculate the total amount that Vargis would expect at a 75% utilization rate for Cost A, Cost B, and Cost
D. Develop an equation that Vargis can use to predict total cost for any level of hours within its range of operation.

Question

Vargis Corporation has a machining capacity of 200,000 hours per year. Utilization of capacity is normally 75%; it has been as low as 40% and as high as 90%. An analysis of the accounting records revealed the following selected costs:
  
Vargis uses the high-low method to analyze cost behavior. 
Required: 
A. Classify each of the costs as being either variable, fixed, or semivariable.
B. Calculate amounts for the two unknowns in the preceding table.
C.
C. Calculate the total amount that Vargis would expect at a 75% utilization rate for Cost A, Cost B, and Cost
D. Develop an equation that Vargis can use to predict total cost for any level of hours within its range of operation.

Quizplus · Accepted Answer

The Answer of Vargis Corporation has a machining capacity of 200,000 hours per year. Utilization of capacity is normally 75%; it has been as low as 40% and as high as 90%. An analysis of the accounting records revealed the following selected costs:
  
Vargis uses the high-low method to analyze cost behavior. 
Required: 
A. Classify each of the costs as being either variable, fixed, or semivariable.
B. Calculate amounts for the two unknowns in the preceding table.
C.
C. Calculate the total amount that Vargis would expect at a 75% utilization rate for Cost A, Cost B, and Cost
D. Develop an equation that Vargis can use to predict total cost for any level of hours within its range of operation.

Vargis Corporation Has a Machining Capacity of 200,000 Hours Per