Question

Using the high-low method, what is the variable cost? $2 per direct labor-hour $2.31 per direct labor-hour $.30 per direct labor-hour $3.33 per direct labor-hour

Answer 1

$0.30 per direct labor-hour

Step-by-step explanation:

The computation of the variable cost per direct labor is shown below:

Variable cost per direct hour = (High maintenance cost incurred - low maintenance cost incurred) ÷ (High direct labor hours - low direct labor hours)

= ($4,000 - $1,900) ÷ (9,000 hours - 2,000 hours)

= $2,100 ÷ 7,000 hours

= $0.30 per direct labor-hour