Question

Using the high-low method, how much is the cost per machine hour?

A) $1.50
B) $2.25
C) $1.69
D) $1.34

Answer 1

Using the high-low method, the cost per machine hour for Portman Company is $1.50 (Option A).

The correct option is A.

Step-by-step explanation:

To calculate the cost per machine hour using the high-low method, we need to identify the variable cost per machine hour. The high and low points are chosen from the activity levels and their corresponding costs.

Let's use January (low) and March (high) in this case:

1. Calculate the variable cost per machine hour:

Variable Cost per Machine Hour = High Cost - Low Cost / High Activity - Low Activity

Variable Cost per Machine Hour = $4,800 - $3,60 / 2,900 - 2,100

Variable Cost per Machine Hour = $1,200 / 800

Variable Cost per Machine Hour = $1.50

Therefore, the correct answer is:

A) $1.50

The correct option is A.

Your complete question is: Portman Company's activity for the first three months of 2013 are as follows: Machine HoursElectrical Cost January2,100$3,600 February2,600$4,350 March2,900$4,800

Using the high-low method, how much is the cost per machine hour?

A) $1.50

B) $2.25

C) $1.69

D) $1.34