Use the following information to answer the next question(s). The following info

Question

Use the following information to answer the next question(s). The following information was collected regarding maintenance costs at different activity levels measured in machine hours: Number of Machine Hours 8,000 10,000 11,000 9,000 14,000 12,000 Total Maintenance Costs $600,000 640,000 800,000 700,000 900,000 870,000 13) Using the high-low method, an estimate of the variable component for maintenance costs is A) $64.28. B) $52.50. $75.00. D$50.00 14) Using the high-low method, an estimate of the fixed portion of maintenance costs is A) $165,000. B) $224,000. C) $300,000. (D) $200,000. 15) Using the cost formula developed under the high-low method, what would be the estimate of maintenance costs if 13,000 machine hours are scheduled for next month A) $950,000. B) $882,000. C) $650,000. 850,000.

Explanation / Answer

Mainetanance costs Machine hours Low level 600000 8000 High level 900000 14000 Difference 300000 6000 13 Variable cost = Change in maintenance cost/Change in machine hours = 300000/6000 = $50 14 Fixed portion of maintenance cost=Total cost at high level-(Variable cost*Machine hours) = 900000-(14000*50)= $200000 15 Cost formula = $200000+$50X Estimated maintenance costs at 13000 machine hours = 200000+(13000*50) = $850000

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