The recent high and low levels of hours operated and monthly repair cost for heavy equipment for Universal Mfg. are shown below:

-Refer to the above data. Using the high-low method, compute the fixed element of Universal's monthly repair cost.

Question

The recent high and low levels of hours operated and monthly repair cost for heavy equipment for Universal Mfg. are shown below:
 
-Refer to the above data. Using the high-low method, compute the fixed element of Universal's monthly repair cost.

Quizplus · Accepted Answer

The high-low method calculates the fixed cost by taking the total cost at the highest activity level and subtracting the variable cost (variable rate multiplied by the highest activity level). The difference between the highest and lowest total costs is divided by the difference in activity levels to find the variable rate. The fixed cost is then found by subtracting the total variable cost from the total cost at either the high or low activity level.

The Recent High and Low Levels of Hours Operated and Monthly