Final answer:
Using the high-low method, the variable element of manufacturing overhead cost per machine hour for Ben Dover Company is calculated to be $1.70. This is determined by analyzing the highest and lowest overhead costs and machine hours, then dividing the change in cost by the change in machine hours. Therefore, the variable element of the manufacturing overhead cost per machine hour is $1.70, which corresponds to option B.
Step-by-step explanation:
To calculate the variable element of manufacturing overhead cost per machine hour using the high-low method, we first identify the highest and lowest activity levels and their corresponding overhead costs. The two months that represent these extremes are June (high) with 55,000 machine manufacturing hours and $102,000 in overhead cost, and May (low) with 40,000 hours and $76,500 in overhead cost.
Next, we find the difference between the high and low activity levels:
55,000 hours - 40,000 hours = 15,000 hours (change in machine hours)
Then, we calculate the difference in costs:
$102,000 - $76,500 = $25,500 (change in cost)
Now, we can determine the variable cost per machine hour by dividing the change in cost by the change in machine hours:
$25,500 / 15,000 hours = $1.70 per machine hour.
Therefore, the variable element of the manufacturing overhead cost per machine hour is $1.70, which corresponds to option B.