Question

The controller of Sandhill 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 $2,880 3,820 February 3,273 4,364 March 3,928 6,546 April 4,632 8,619 May 3,491 5,455 June 4,844 8,730 (a1) Determine the variable-cost components using the high-low method. (Round answer to 2 decimal places e.g. 2.25.)

Answer 1

Answer:

Variable cost per unit= $0.4

Explanation:

Giving the following information:

Month Total Maintenance Costs Total Machine Hours

January $2,880 3,820

February 3,273 4,364

March 3,928 6,546

April 4,632 8,619

May 3,491 5,455

June 4,844 8,730

To calculate the variable component using the high-low method, we need to use the following formula:

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

Variable cost per unit= (4,844 - 2,880) / (8,730 - 3,820)

Variable cost per unit= $0.4