Question

Wallace Heating is attempting to estimate its costs of manufacturing heating ducts for the coming year using the high-low method. The cost driver is number of labor hours. Wallace determines that the high and low costs are $27,049 and $19,772, respectively, and the values for the cost driver are 4,168 and 2,672 hours, respectively. What is the variable cost per hour?

Answer 1

Answer:

Variable Cost per hour is $4.86

Explanation:

given data

Highest Cost = $27,049

Lowest Cost = $19,772

Highest Cost Driver = 4,168  hours

Lowest Cost Driver =  2,672  hours

solution

we get here Variable Cost per hour that is express as

Variable Cost per hour = (Highest Cost - Lowest Cost) ÷ (Highest Cost Driver - Lowest Cost Driver)   ......................1

put here value and we get

Variable Cost per hour = $\frac{27049-19772}{4168-2672}$    

Variable Cost per hour = $\frac{7277}{1496}$    

Variable Cost per hour = 4.86

so Variable Cost per hour is $4.86