Check my work QS 18-3 Cost behavior estimation-high-low method LO P1 The followi

Question

Check my work QS 18-3 Cost behavior estimation-high-low method LO P1 The following information is available for a company's maintenance cost over the last seven months Month June July August September October November December Maintenance HoursMaintenance Cost $5,100 6,550 4,750 5,650 6,550 6,490 3,250 17 13 16 25 7 Using the high-low method, estimate both the fixed and variable components of its maintenance cost. High-Low method - Calculation of variable cost per unit ost at high point minus cost at low point Change in cost Change in volume Volume at high point minus volume at low point Total cost at the high point Variable costs at the high point: $ 6,490.00 25 hours Volume at the high point: Variable cost per unit Total variable costs at the high point Total fixed costs Total cost at the low point Variable costs at the low point: Volume at the low point Variable cost per unit Total variable costs at the low point Total fixed costs

Explanation / Answer

High-Low Method- calculation of variable cost per unit Change in cost/ change in volume= (cost at high point-cost at low point)/(volume at high point-volume at low point)                                                                     =( 6490-3250)/(25-7)= 3240/18= $180 Variable cost per unit is $180 Total cost at the high point $6490 Variable cost at the high point 25 hours variable cost per unit $180 Total variable cost at the high point( 25*180) $4500 Total fixed cost( 6490-4500) $1990 Total cost at the low point $3250 Variable cost at the low point 7 hours variable cost per unit $180 Total variable cost at the low point( 7*180) $1260 Total fixed cost( 3250-1260) $1990

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