The controller of Dalton Industries has collected the following monthly expense

Question

The controller of Dalton Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs.

Total
Maintenance Costs
January $2,420
February 3,034
March 3,590
April 4,740
May 3,156
June 4,720

Total
Machine Hours
January 310
February 400
March 602
April 774
May 499
June 810

Determine the fixed and variable cost components using the high-low method. (Round variable cost to 2 decimal places, e.g. 10.50, and the other answer to 0 decimal places, e.g. 125.)

Explanation / Answer

Variable cost per unit = (4720 - 2420) / (810 - 310) = $4.6

Fixed cost = 4720 - (4.6 * 810) = $994
                   2420 - (4.6 * 310) = $994 <---The company will incurr a cost of $994 regardless of production level.

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