KLM Co. is attempting to predict its maintenance costs more
accurately. Maintenance costs and machine hours for the first four months are
as follows:
Answer
| KLM Co. is | ||
| Required No. 1 | ||
| Month | Machine Hours | Maintenance |
| Mar. | 1430 | 8810 |
| Apr. | 1130 | 7850 |
| Difference | 300 | 960 |
| Variable Cost per unit | 3.20 (960/300) | |
| Required No. 2 | ||
| Total Cost in Mar. | 8810 | |
| Less: Variable Cost (3.20 x 1430) | 4,576 | |
| Fixed Cost | 4,234 | |
| Required No. 3 | ||
| Fixed Cost | 4,234 | |
| Variable Cost (3.20 x 1400) | 4,480 | |
| Total Cost | 8,714 |
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