Portman Company's activity for the first three months of 2019 are as follows: $\begin{array}{lll}&\text { Machine Hours}&\text { Electrical Cost }\
\text { January } & 2,100 & \$ 4,800 \
\text { February } & 2,600 & \$ 5,800 \
\text { March } & 2,900 & \$ 6,400
\end{array}$ Using the high-low method, how much is the cost per machine hour?

Question

Portman Company's activity for the first three months of 2019 are as follows: $\begin{array}{lll}&\text { Machine Hours}&\text {  Electrical Cost }\
\text { January } & 2,100 & \$ 4,800 \
\text { February } & 2,600 & \$ 5,800 \
\text { March } & 2,900 & \$ 6,400
\end{array}$ Using the high-low method, how much is the cost per machine hour?

Quizplus · Accepted Answer

The high-low method calculates the variable cost per unit by taking the difference in costs between the highest and lowest activity levels and dividing by the difference in activity levels. Here, the difference in electrical cost is $6,400 - $4,800 = $1,600, and the difference in machine hours is 2,900 - 2,100 = 800. Thus, the cost per machine hour is $1,600 / 800 = $2.00.

Portman Company's Activity for the First Three Months of 2019