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A Case Study on Gargantuan Industries and Jonathan Macintosh's Orchard

A case study exploring cost analysis and decision-making in manufacturing operations for Gargantuan Industries and Jonathan Macintosh's Orchard.

Benjamin Clark
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Cost Analysis and Decision-Making in Manufacturing Operations: A Case Studyon Gargantuan Industries and Jonathan Macintosh's OrchardProblem 6-27Jonathan Macintosh is a highly successful Pennsylvania orchardman who has formed his owncompanytoproduce and package applesauce. Apples can be stored for several months in coldstorage, so applesauceproduction is relatively uniform throughout the year. The recently hiredcontroller for the firm isabout to apply the high-low method in estimating the company’s energycost behavior. The followingcosts were incurred during the past 12 months:Month Pints of Applesauce Produced Energy CostJanuary ................................................................ 35,000 .............................................. $23,400February ............................................................... 21,000 .............................................. 22,100March .................................................................. 22,000 .............................................. 22,000April ..................................................................... 24,000 .............................................. 22,450May ..................................................................... 30,000 .............................................. 22,900June .................................................................... 32,000 .............................................. 23,350July ...................................................................... 40,000 .............................................. 28,000August ................................................................. 30,000 .............................................. 22,800September ............................................................ 30,000 ..............................................23,000October ................................................................ 28,000 .............................................. 22,700November ............................................................. 41,000 ..............................................24,100December ............................................................ 39,000 .............................................. 24,950Required:1.Use the high-low method toestimate the company’s energy cost behavior and express it inequation form.•High: The highest production month isJuly, with 40,000 pints and an energy cost of$28,000.•Low: The lowest production month isFebruary, with 21,000 pints and an energy cost of$22,100.

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