Question

The controller of Crane 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 $2,590 330 February 2,890 380 March 3,490 530 April 4,390 660 May 3,090 530 June 4,790 730

(a1) Determine the variable cost components using the high-low method. (Round answer to 2 decimal places e.g. 2.25.) Variable cost per machine hour $enter the variable cost components using the high-low method rounded to 2 decimal places eTextbook and Media
(a2) Determine the fixed cost components using the high-low method. Total fixed costs $enter the fixed cost components using the high-low method

Answer 1

Crane Industries

a1) The variable cost per unit = $5.50

a2) The fixed costs per month = $775

Step-by-step explanation:

a) Data and Calculations:

Month Total Maintenance Costs Total Machine Hours

January $2,590 330

February 2,890 380

March 3,490 530

April 4,390 660

May 3,090 530

June 4,790 730

Using the High-Low Method:

Month Total Maintenance Costs Total Machine Hours

High:

June $4,790 730

Low:

January $2,590 330

Difference $2,200 400

Variable cost per unit = $5.50 ($2,200/400)

Fixed costs:

June total costs = $4,790

June total units = 730

Total variable costs = $4,015 ($5.50 * 730)

Fixed costs = Total costs - total variable costs

= $775