The controller of Cullumber Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs.
Month Total Maintenance Costs Total Machine Hours
January $2,730 330
February 3,030 380
March 3,630 530
April 4,530 660
May 3,230 530
June 5,450 730
1. Determine the variable cost components using the high-low method.
2. Determine the fixed cost components using the high-low method.

Respuesta :

Answer:

1. Variable cost = (Cost at highest activity - Cost at lowest activity) / (Highest activity - Lowest activity)

Variable cost = ($5,450 - $2,730) / (730 - 330)

Variable cost = $2,720 / 400

Variable cost = $6.8

2. Fixed cost = Total cost - Variable cost

Fixed cost = $5,450 - (730*$6.8)

Fixed cost = $5,450 - $4,964

Fixed cost = $486

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