The following data pertains to activity and maintenance cost for two recent periods: Maintenance cost is a mixed cost with both fixed and variable components.Using the high-low method, the cost formula for maintenance cost is:

Question

The following data pertains to activity and maintenance cost for two recent periods:  Maintenance cost is a mixed cost with both fixed and variable components.Using the high-low method, the cost formula for maintenance cost is:

Quizplus · Accepted Answer

11ea7998_5e30_12f8_911b_714bcbe081cf_TB2627_00_TB2627_00 Variable cost per unit = Change in cost ÷ Change in activity
= $2,500 ÷ 1,000 units
= $2.50 per unit
Fixed cost = Total cost - Variable cost element
= $34,000 - ($2.50 per unit × 8,000 units)
= $34,000 - $20,000
= $14,000

The Following Data Pertains to Activity and Maintenance Cost for Two