Portman Company's activity for the first three months of 2016 are as follows: $$\begin{array} { l c c }
& \text { Machine Hours } & \text { Electrical Cost } \
\text { January } & 2,100 & \$ 4,800 \
\text { February } & 2,600 & \$ 5,800 \
\text { March } & 2,900 & \$ 6,400
\end{array}$$ Using the high-low method, how much is the cost per machine hour?
A)$2.00
B)$3.00
C)$2.26
D)$1.78

Question

Portman Company's activity for the first three months of 2016 are as follows: $$\begin{array} { l c c } 
& \text { Machine Hours } & \text { Electrical Cost } \
\text { January } & 2,100 & \$ 4,800 \
\text { February } & 2,600 & \$ 5,800 \
\text { March } & 2,900 & \$ 6,400
\end{array}$$ Using the high-low method, how much is the cost per machine hour?
A)$2.00
B)$3.00
C)$2.26
D)$1.78

Quizplus · Accepted Answer

The high-low method calculates the variable cost per unit by taking the difference in costs and dividing by the difference in activity levels: ($6,400 - $4,800) / (2,900 - 2,100) = $2.00 per machine hour.

Portman Company's Activity for the First Three Months of 2016