Question

Felinas Inc. produces floor mats for cars and trucks. The owner, Kenneth Felinas, asked you to assist him in estimating his maintenance costs. Together, Mr. Felinas and you determined that the single best cost driver for maintenance costs was machine hours. Below are data from the previous fiscal year for maintenance expense and machine hours: Month Maintenance Expense Machine Hours 1 $ 3,120 2,200 2 3,310 2,300 3 3,490 2,400 4 3,620 2,430 5 3,620 2,280 6 3,680 2,440 7 3,610 2,420 8 3,420 2,390 9 3,140 2,210 10 2,880 2,080 11 2,780 1,690 12 2,940 2,070 Using the high-low method, total monthly fixed cost is calculated to be:

Answer 1

Answer:

The answer is: the unit variable expense is $1.20 per machine hour

Explanation:

In order to calculate the unit variable cost we first take the month with the highest and lowest maintenance expense and machine hours (Highest = month 6, Lowest = month 11). We use the following formula:

unit variable cost = (highest expense - lowest expense) / (highest machine hours - lowest machine hours)

= ($3,680 - $2,780) / (2,440 - 1,690) = $1.20 per machine hour