Answer:
Total cost= $5,425
Step-by-step explanation:
Giving the following information:
Month Machine _Hours Amount
January 200 $2,800
February 350 3,000
March 450 4,000
April 500 5,000
May 600 5,200
June 580 5,800
<u>First, we need to calculate the fixed and variable costs. To do it, we will use the high-low method:</u>
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (5,800 - 2,800) / (600 - 200)
Variable cost per unit= $7.5 per hour
Fixed costs= Highest activity cost - (Variable cost per unit * HAU)
Fixed costs= 5,800 - (7.5*600)
Fixed costs= $1,300
Fixed costs= LAC - (Variable cost per unit* LAU)
Fixed costs= 2,800 - (7.5*200)
Fixed costs= $1,300
<u>Now, we can determine the total cost for 550 hour</u>s:
Total cost= 1,300 + 7.5*550
Total cost= $5,425
