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Using the highlow ​method, what would the total maintenance costs be if machine hours were​ used? (Round any intermediary calculations to the nearest​ cent.)

User Yokogeri
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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

User Venkatesh
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