Question

Jackson ​Company, which uses the​ high-low method to analyze cost​ behavior, has determined that machine hours best predict the​ company's total utilities cost. The​ company's cost and machine hour usage data for the first six months of the year​ follow: LOADING...​(Click the icon to view the​ data.) Requirements Using the​ high-low method, answer the following​ questions: 1. What is the variable utilities cost per machine​ hour? 2. What is the fixed cost of utilities each​ month? 3. If Jackson Company uses 1 comma 230 machine hours in a​ month, what will its total costs​ be?

Answer 1

1. What is the variable utilities cost per machine​ hour?

• $2.29 per machine hour

2. What is the fixed cost of utilities each​ month?

• $994

3. If Jackson Company uses 1 comma 230 machine hours in a​ month, what will its total costs​ be?

• $3,810.70

Step-by-step explanation:

Some information was missing so I looked it up:

Month Total Cost Machine Hours

January $3,400 1,050

February $3,700 1,150

March $3,500 1,000

April $3,780 1,200

May $4,000 1,350

June $4,200 1,400

variable costs using the high low method = ($4,200 - $3,400) / (1,400 - 1,050) = $800 / 350 = $2.2857 = $2.29 per machine hour

fixed costs = $4,200 - (1,400 x $2.29) = $994

total costs for 1,230 hours = $994 + (1,230 x $2.29) = $3,810.70