Hi, the question you posted was incomplete, however, i have searched the full question and it reads as follows :
Maintenance costs at Seaside Manufacturing over the past six months are listed in the following table.
Month
Maintenance cost
Machine
hours
January
?$13,600
?15,500
February
?$14,720
?16,900
March
$13,000
14,000
April
?$14,480
?16,600
May
$16,000
18,000
June
?$13,200
?15,000
Using the high low method, what would the total maintenance costs be if 17,800 machine hours were? used? (Round any intermediary calculations to the nearest? cent.)
A. $15,850
B. $31,350
C. $13,350
D. $ 2650
Answer:
A. $15,850
Step-by-step explanation:
The High Low Method, is used to separate variable and fixed cost element in a semi-variable cost. The Maintenance cost is a semi-variable cost with both a variable and a fixed cost element.
So, first identify the 2 points. That is the high and the low
May is the High
March is the Low
Next, determine the variable cost per unit :
Variable Cost = Difference in Overhead Cost between the High and the Low ÷ Difference in the Independent Variable between the High and the Low
Therefore,
Variable Cost = ($16,000 - $13,000) ÷ (18,000 - 14,000)
= $0.75 per machine hour
Next, find the fixed cost element
Fixed Cost = Total Overheads - Variable Cost at Chosen Point
I will choose the High point !
Therefore,
Fixed Cost = $16,000 - ($0.75 × 18,000)
= $2,500
Now, we have our equation as
Total Costs = $2,500 + $0.75 × machine hours
So to find the total costs if 17,800 machine hours were used, we simply need to apply the equation as follows :
Total Costs = $2,500 + $0.75 × machine hours
Therefore,
Total Costs = $2,500 + $0.75 × 17,800
= $15,850