Felinas Inc.produces floor mats for cars and trucks.The owner,Kenneth Felinas,asked you to assist him in estimating his maintenance costs.Together,Mr.Felinas and you determined that the single best cost driver for maintenance costs was machine hours.Below are data from the previous fiscal year for maintenance expense and machine hours:
Using the high-low method,total monthly fixed cost is calculated to be:

Question

Felinas Inc.produces floor mats for cars and trucks.The owner,Kenneth Felinas,asked you to assist him in estimating his maintenance costs.Together,Mr.Felinas and you determined that the single best cost driver for maintenance costs was machine hours.Below are data from the previous fiscal year for maintenance expense and machine hours: 
Using the high-low method,total monthly fixed cost is calculated to be:

Quizplus · Accepted Answer

To calculate total monthly fixed cost using the high-low method, we need to find the variable cost per machine hour first. 
Variable cost per machine hour = (Total cost at high activity level - Total cost at low activity level)/ (Number of machine hours at high activity level - Number of machine hours at low activity level)
Variable cost per machine hour = ($1,788 - $960)/ (336 - 240) = $828/ 96 = $8.63
Next, we can use the variable cost per machine hour to calculate total monthly fixed cost using either the high or low activity level. 
Using the high activity level data: 
Total cost = (Variable cost per machine hour x Number of machine hours) + Total monthly fixed cost
$1,788 = ($8.63 x 336) + Total monthly fixed cost
Total monthly fixed cost = $752.17, which we can round to $752. 
Therefore, the best choice is C.