Maintenance costs at a Straiton Corporation factory are listed below: Management believes that maintenance cost is a mixed cost that depends on machine-hours.Use the high-low method to estimate the variable and fixed components of this cost.Compute the variable component first and round off to the nearest whole cent.Compute the fixed component second and round off to the nearest whole dollar.These estimates would be closest to:

Question

Maintenance costs at a Straiton Corporation factory are listed below:  Management believes that maintenance cost is a mixed cost that depends on machine-hours.Use the high-low method to estimate the variable and fixed components of this cost.Compute the variable component first and round off to the nearest whole cent.Compute the fixed component second and round off to the nearest whole dollar.These estimates would be closest to:

Quizplus · Accepted Answer

Using the high-low method:
Highest Total Cost: $140,505 for 8,250 machine-hours
Lowest Total Cost: $99,420 for 5,250 machine-hours

Variable cost per machine-hour: (140,505 - 99,420) / (8,250 - 5,250) = $0.10
Fixed cost: 99,420 - (5,250 x 0.10) = $19,801

Therefore, the closest estimate is $0.10 per machine-hour and $19,801 per month, rounded off to the nearest whole dollar. Option D is the correct choice. 11ea7998_5e2c_907a_911b_b735522ba0bb_TB2627_00_TB2627_00 Variable cost per unit = Change in cost ÷ Change in activity
= $924 ÷ 97 machine-hours
= $9.53 per machine-hour
Fixed cost = Total cost - Variable cost element
= $54,767 - ($9.53 per machine-hour × 3,669 machine-hours)
= $54,767 - $34,966
= $19,801

Maintenance Costs at a Straiton Corporation Factory Are Listed Below