CHAPTER 10 DETERMINING HOW COSTS BEHAVE10-16 (10 min.)Estimating a cost !nction"1. Slope coefcient= # $5, 400 $4, 00010, 000 6, 000# $1, 4004, 000# $0.35 per machine-hourConstant= Total cost (Slope coefcient Quantit o! cost "ri#er)= $5$%00 ($0.35 10$000) = $1$&00= $%$000 ($0.35 '$000) = $1$&00The cost !unction (ase" on the t)o o(ser#ations isMaint$nanc$ costs # %1&'00 ( %0")* Mac+in$-+o!,s*. The cost !unction in re+uirement 1 is an estimate o! ho) costs (eha#e )ithin the rele#ant ran,e$ not at cost le#els outsi"ethe rele#ant ran,e. -! there are no months )ith .ero machine-hours represente" in the maintenance account$ "ata in that accountcannot (e use" to estimate the /0e" costs at the .ero machine-hours le#el. 1ather$ the constant component o! the cost !unctionpro#i"es the (est a#aila(le startin, point !or a strai,ht line that appro0imates ho) a cost (eha#es )ithin the rele#ant ran,e.10-1- (15 min.) I.$nti/ing 0a,ia12$-& 34$.-& an. mi4$.-cost !nctions"1. See Solution 20hi(it 10-13.*. Contract 14y = $50Contract *4y = $30 5 $0.*0XContract 34y = $1X)here X is the num(er o! miles tra#ele" in the "a.3. Cont,act Cost 5!nction1*36i0e" 7i0e"8aria(leSO67TION E8HIBIT 10-1- P6OTS O5 CAR RENTA6 CONTRACTS O55ERED B9 PACI5IC CORP" 10-:1 (*0 min.) Acco!nt ana2/sis 1. The electricit cost is #aria(le (ecause$ in each month$ the cost "i#i"e" ( the num(er o! 9ilo)att hours e+uals a constant $0.30. The "e/nition o! a #aria(le cost is one that remains constant per unit. The telephone cost is a mi0e" cost (ecause the cost neither remains constant in total nor remains constant per unit. The )ater cost is /0e" (ecause$ althou,h )ater usa,e #aries !rom month to month$ the cost remains constant at$'0. *. The month )ith the hi,hest num(er o! telephone minutes is :une$ )ith 1$%%0 minutes an" $&;.;0 o! cost. The month )ith the lo)est is 1$500 minutes) = $130 5 $''0 5 $30 = $;*010-::(30 min.) Acco!nt ana2/sis m$t+o." 1" Man!act!,ing cost c2assi3cation o, :00';Acco!ntTota2Costs o Tota2 CostsT+at is Va,ia12$