Maintenance costs at a Straiton Corporation factory are listed below:
Management believes that maintenance cost is a mixed cost that depends on machine-hours.Use the high-low method to estimate the variable and fixed components of this cost.Compute the variable component first and round off to the nearest whole cent.Compute the fixed component second and round off to the nearest whole dollar.These estimates would be closest to:
A) $0.10 per machine-hour; $54,382 per month
B) $15.00 per machine-hour; $54,316 per month
C) $9.12 per machine-hour; $21,309 per month
D) $9.53 per machine-hour; $19,801 per month

Question

Maintenance costs at a Straiton Corporation factory are listed below:
 Management believes that maintenance cost is a mixed cost that depends on machine-hours.Use the high-low method to estimate the variable and fixed components of this cost.Compute the variable component first and round off to the nearest whole cent.Compute the fixed component second and round off to the nearest whole dollar.These estimates would be closest to:
A) $0.10 per machine-hour; $54,382 per month 
B) $15.00 per machine-hour; $54,316 per month 
C) $9.12 per machine-hour; $21,309 per month 
D) $9.53 per machine-hour; $19,801 per month

Quizplus · Accepted Answer

11ea7761_1882_804f_81a5_9b7c5166183c_TB2580_00 Variable cost per unit = Change in cost ÷ Change in activity
= $924 ÷ 97 machine-hours
= $9.53 per machine-hour
Fixed cost = Total cost - Variable cost element
= $54,767 - ($9.53 per machine-hour × 3,669 machine-hours)
= $54,767 - $34,966
= $19,801

Maintenance Costs at a Straiton Corporation Factory Are Listed Below