Maintenance costs at Seaside Manufacturing over the past six months are listed in the following table. Using the high-low method, what would the variable maintenance cost per machine hour be?

Question

Maintenance costs at Seaside Manufacturing over the past six months are listed in the following table.  Using the high-low method, what would the variable maintenance cost per machine hour be?

Quizplus · Accepted Answer

Using the highest and lowest data points, we can calculate the variable cost per machine hour as follows:
Variable cost per machine hour = (Total cost at highest activity level - Total cost at lowest activity level) / (Highest activity level - Lowest activity level)
Variable cost per machine hour = ($7,475 - $5,600) / (9,000 - 6,000)
Variable cost per machine hour = $1,875 / 3,000
Variable cost per machine hour = $0.625
Therefore, the variable maintenance cost per machine hour is $0.625, which is closest to answer choice B ($0.86) after rounding to the nearest cent.

Maintenance Costs at Seaside Manufacturing Over the Past Six Months