Question

Given the following costs and activities for Dance Company's electrical costs, use the high-low method to determine Dance's variable electrical costs per machine hour. Costs Machine Hours August $11,700 15,000 September 13,200 17,500 October 11,400 14,500 a.$6.00 b.$1.20 c.$0.60 d.$2.08

Answer 1

Answer:

The variable cost is $0.6 per Machine Hour. So, option C is the correct answer.

Explanation:

The high low method is a method used to calculate the variable component per unit in a mixed cost. A mixed cost is a cost which contains an element of both the fixed and the variable cost.

The formula for variable cost per unit under High-low method is,

Variable cost per unit = (Cost at Highest activity - Cost at lowest activity) / (Highest activity units - lowest activity units)

The highest activity is in September while the lowest is in October.

Variable cost per unit = (13200 - 11400) / (17500 - 14500)

Variable cost per unit = $0.6 per Machine hour