Question

Portman Company's activity for the first three months of 2016 are as follows:

Machine Hours Electrical Cost
January 2500 $4800
February 3000 $5800
March 3300 $6400
Using the high-low method, how much is the cost per machine hour?

Answer 1

Variable cost per unit= $0.5 per machine hour

Step-by-step explanation:

Giving the following information:

Machine Hours Electrical Cost

January 2500 $4800

February 3000 $5800

March 3300 $6400

To calculate the cost per hour, 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= (3,300 - 2,500) / (6,400 - 4,800)

Variable cost per unit= $0.5 per machine hour