The Chambers Manufacturing Company recorded overhead costs of $14,182 at an activity level of 4,200 machine hours and $8,748 at 2,300 machine hours.The records also indicated that overhead of $9,730 was incurred at 2,600 machine hours.What is the variable cost per machine hour using the high-low method to estimate the cost equation?

Question

Quizplus · Accepted Answer

Variable cost per machine hour = Change in total overhead cost / Change in machine hours
Using the high-low method,
Change in total overhead cost = $14,182 - $8,748 = $5,434
Change in machine hours = 4,200 - 2,300 = 1,900
Variable cost per machine hour = $5,434 / 1,900 = $2.86

Therefore, the answer is option B, $2.86.

The Chambers Manufacturing Company Recorded Overhead Costs of $14,182 at an Activity