Question

Dangerfield Pty Ltd would like to determine the variable rate for electricity per machine hour in order to estimate the electricity costs for the months of May and June. Information for the four months January to April are listed below:

Machine hours worked Electricity costs

January 2,400 $2,060

February 2,600 $2,122

March 2,800 $2,241

April 3,000 $2,420

Estimated units to be produced:

May: 2,150

June: 2,260

Each unit requires an average of 1.5 machine hours.

Required:

1. Compute the variable and fixed cost components of the total electricity cost.

2. Using the data calculated above, estimate the electricity for the months of May and June.