Variable Cost Analysis
Zero Time Oil Change has been in business for six months. The company pays $0.50 per quart for the oil it uses in servicing cars. Each job requires an average of 4 quarts of oil. The company estimates that in the next three months, it will service 240, 288, and 360 cars.
1.Compute the cost of oil for each of the three months and the total cost for all three months.
|
Month |
Volume in Machine Hours |
Electricity Cost |
|
July |
6,000 |
$60,000 |
|
August |
5,000 |
53,000 |
|
September |
4,500 |
49,500 |
|
October |
4,000 |
46,000 |
|
November |
3,500 |
42,500 |
|
December |
3,000 |
39,000 |
|
Six-month total |
26,000 |
$290,000 |
Using the high-low method, determine the variable electricity cost per machine hour and the monthly fixed electricity cost. Estimate the total variable electricity costs and fixed electricity costs if 4,800 machine hours are projected to be used next month.