The management of Harrigill Corporation would like to have a better understandin
ID: 2466293 • Letter: T
Question
The management of Harrigill Corporation would like to have a better understanding of the behavior of its inspection costs. The company has provided the following data:
Management believes that inspection cost is a mixed cost that depends on direct labor-hours.
Required:
Estimate the variable cost per direct labor-hour and the fixed cost per month using the high-low method. (Do not round intermediate calculations. Round your final answers to two decimal places.)
The management of Harrigill Corporation would like to have a better understanding of the behavior of its inspection costs. The company has provided the following data:
Explanation / Answer
High low method Variable cost per unit (b) = (y2 - y1) / (x2 - x1) y2 = total cost at highest level of activity 54979 y1 = total cost at lowest level of activity 52493 x2 = labor hours at highest level of activity 5690 x1 = labor hours at lowest level of activity 5256 Variable cost per unit = (54979 - 52493 ) / ( 5690 - 5256) = 2486 / 434 = 5. 73 Total fixed cost = y2 - bx2 = 54979 - 5.73 * 5690 = 54979 - 32603.7 = 22375.3 Variable cost per direct labor hour 5.73 Fixed cost per month 22375.3
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