Exhibit 5-4
Wayside Company has machine hours of 5,000 and machine costs of $170,000 at the high data point.Machine hours are 2,000 and machine costs are $110,000 at the low data point.Wayside uses the high-low method to estimate costs.
-Refer to Exhibit 5-4.What is the estimate of total machine costs at Wayside when 3,700 machine hours are used?
A)$144,000
B)$70,000
C)$140,000
D)$74,000
E)None of the answer choices is correct.

Question

Quizplus · Accepted Answer

First, calculate the variable cost per machine hour using the high-low method: ($170,000 - $110,000) / (5,000 - 2,000) = $60,000 / 3,000 = $20 per machine hour. Then, calculate the fixed cost: $170,000 - ($20 * 5,000) = $70,000. Estimate total costs at 3,700 machine hours: ($20 * 3,700) + $70,000 = $144,000.

Exhibit 5-4 Wayside Company Has Machine Hours of 5,000 and Machine Costs