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Cerrena [4.2K]
3 years ago
7

Song, Inc., uses the high-low method to analyze cost behavior. The company observed that at 22,000 machine hours of activity, to

tal maintenance costs averaged $33.40 per hour. When activity jumped to 25,000 machine hours, which was still within the relevant range, the average total cost per machine hour was $30.40.On the basis of this information, the variable cost per machine hour was:___________A. $8.40.B. $22.00.C. $25.00.D. $30.40.E. $33.40.
Business
1 answer:
andriy [413]3 years ago
8 0

Answer:

Variable cost per unit= $8.4

Explanation:

<u>First, we need to calculate the total cost for each level of machine hours:</u>

Low activity level:

Total cost= 22,000*33.4= $734,800

High activity level:

Total cost= 25,000*30.4= $760,000

<u>Now, we can determine the variable and fixed costs:</u>

Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)

Variable cost per unit= (760,000 - 734,800) / (25,000 - 22,000)

Variable cost per unit= $8.4

Fixed costs= Highest activity cost - (Variable cost per unit * HAU)

Fixed costs= 760,000 - (8.4*25,000)

Fixed costs= $550,000

Fixed costs= LAC - (Variable cost per unit* LAU)

Fixed costs= 734,800 - (8.4*22,000)

Fixed costs= $550,000

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Earning per share (EPS) = $0.36 per share.

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For this question, continuous multiple-step statement of comprehensive income can be prepared as follows:

Lindor Corporation

Multiple-step Statement of Comprehensive Income for 2016

<u>Details                                                                  $      </u>

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Cost of goods sold                                    <u> 1,400,000 </u>

Gross profit                                                   900,000

Operating expenses:

Selling and administrative expenses        <u> (420,000) </u>

Operating income                                        480,000

Non operating income and exp.:

Unrealized holding gains on inv. sec.          80,000

Interest expense                                          <u> (40,000) </u>

Income before tax                                        520,000

Income tax (30% * $520,000)                    <u> (156,000) </u>

Net income                                                  <u>  364,000 </u>

EPS (364,000 / 1,000,000)                                 0.36

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