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Ab 29
Ab 29
Wimmer’s Storage ran its freezer in February, a slow month, for 360 hours for a
total cost of $57,600. In July, a peak month, the freezer ran for 720 hours for a
total cost of $82,080.
Required:
a. What is the cost estimating equation for the department if hours of freezer
use are used as the cost driver?
Answer:
a. Slope (variable costs) = ($82,080 – $57,600) / (720 - 360) = $68
Difficulty: 2 Objective: 4
Terms to Learn: cost estimation, cost function, cost predictions