Slonaker Inc. has provided the following data concerning its maintenance costs:

Question

Slonaker Inc. has provided the following data concerning its maintenance costs:

Management believes that maintenance cost is a mixed cost that depends on machine-hours.

Required:

Estimate the variable cost per machine-hour and the fixed cost per month using the high-low method. (Round your "Variable cost" to 2 decimal places. Omit the "$" sign in your response.)

Machine-Hours Maintenance
Cost   April 5,810           $30,390           May 5,793           $30,300           June 5,775           $30,248           July 5,772           $30,244           August 5,728           $30,089           September 5,806           $30,371           October 5,831           $30,410           November 5,812           $30,389           December 5,796           $30,329        

Explanation / Answer

Variable cost per machine hour = Change in cost/Change in machine hour

= (30410-30089)/(5831-5728)

Variable cost per machine hour = 3.12 per machine hour

Fixed cost = Total cost-Variable cost

= 30410-(5831*3.12)

Fixed cost = $12217

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