The following information is available for a company\'s maintenance cost over th
ID: 2568691 • Letter: T
Question
The following information is available for a company's maintenance cost over the last seven months. Month Maintenance Hours Maintenance Cost June July August September October November December 5 5,000 6.450 4,650 5.550 6.450 6,030 3.150 10 19 14 20 23 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 Total cost at the high point Variable costs at the high point: 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 costsExplanation / Answer
High Low Method - Calculation of Variable cost per Unit
Change in costs
Cost at High point minus Cost at Low point (6030 - 3150)
2880
Variable cost per Unit
160
Change in Volume
Volume at High point minus Volume at Low point (23 - 5)
18
Total Cost at the high point
6030
Variable costs at the high point:
Volume at the high Point
23
Variable cost per Unit
160
Total Variable costs at the high point
3680
Total Fixed costs
2350
Total Cost at the Low point
3150
Variable costs at the Low point:
Volume at the Low Point
5
Variable cost per Unit
160
Total Variable costs at the Low point
800
Total Fixed costs
2350
High Low Method - Calculation of Variable cost per Unit
Change in costs
Cost at High point minus Cost at Low point (6030 - 3150)
2880
Variable cost per Unit
160
Change in Volume
Volume at High point minus Volume at Low point (23 - 5)
18
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