Maintenance costs at a Neller Corporation factory are listed below: Management believes that maintenance cost is a mixed cost that depends on machine-hours.Using the high-low method to estimate the variable and fixed components of this cost,these estimates would be closest to:

Question

Maintenance costs at a Neller Corporation factory are listed below:  Management believes that maintenance cost is a mixed cost that depends on machine-hours.Using the high-low method to estimate the variable and fixed components of this cost,these estimates would be closest to:

Quizplus · Accepted Answer

Variable cost = Change in cost F1F1F1S1F1F1F10 Change in activity
= ($26,860 - $26,532) F1F1F1S1F1F1F10 (2,974 - 2,887) = $3.77
Fixed cost element = Total cost - Variable cost element
= $26,860 - ($3.77 F1F1F1S1F1F1F10 2,974) = $15,648
Therefore,the cost formula for total maintenance cost is $15,648 per period plus $3.77 per machine-hour,or Y = $15,648 + $3.77X

Maintenance Costs at a Neller Corporation Factory Are Listed Below