Respuesta :
Answer:
$4,600
Explanation:
High-Low cost estimation is used to split a mixed cost into variable cost and fixed cost.
The first step is to determine the variable cost per unit with this formula
= High Activity cost - Low Activity Level cost
_____________________________________
High Activity Level (units) - Low Activity Level (units)
In this case, we can slot in the appropriate figure using this formula
= $5,000 - $4,000
__________________
20,000hrs - 15,000hrs
= $,1000
______
5000hrs
= $0.2hr
Using high-low cost estimation, the variable cost per machine hour is $0.2.
Now since total cost equals fixed plus variable cost, we can get our fixed cost by multiplying variable cost per machine hour with activity level and deducting the result from total cost given.
Using the high activity level (20,000), our fixed cost will be:
Fixed cost = Total cost - variable cost per machine hr (activity level)
Fixed cost= $5,000 - $0.2(20,000hr)
Fixed cost = $5,000- $4,000
Fixed cost =$1,000
Having gotten our fixed cost and variable cost per machine hour, we can estimate the total utility cost for 18,000 machine hours by using this formula:
y = a + b(x)
Where y is the total cost, a the fixed cost, b the variable cost per unit and x the activity level.
y = $1,000 + $0.2(18,000)
y = $1,000 + 3,600
y = $4,600.
