Question

The controller of Sunland Production has collected the following monthly expense data for analyzing the cost behavior of electricity costs.

Total Electricity Costs Total Machine Hours
January $2,480 220
February 2,970 360
March 3,570 450
April 4,740 685
May 3,240 400
June 4,870 750
July 4,120 650
August 3,850 580
September 5,010 665
October 4,350 610
November 3,350 360
December 6,330 770

Determine the fixed- and variable-cost components using the high-low method.

Answer 1

maintenance costs are $940 per month plus $7 per machine hour.

Step-by-step explanation:

Base on the scenario been described in the question, we use the following method to solve this

Maintenance cost = (6,330 - 2480)/770-220

Maintenance cost per machine= 3850/550

Maintenance cost per machine = $7

Hours 300 Machine Hours Total costs Less: Variable costs 770 X $7 220 X $7

Total fixed costs $6,330 $5,390 $ 940 $2,480 1,540 $ 940 Therefore, maintenance costs are $940 per month plus $7 per machine hour.