Given the following cost and activity observations for Notwen Company's maintenance costs,use the high-low method to calculate Notwen's monthly fixed costs for maintenance. $$\begin{array} { c c r }
& \text { Cost } & \text { Units Produced } \
\text { January } & \$ 130,000 & 25,000 \
\text { February } & 180,500 & 35,000 \
\text { March } & 151,100 & 28,000 \

\end{array}$$

Question

Given the following cost and activity observations for Notwen Company's maintenance costs,use the high-low method to calculate Notwen's monthly fixed costs for maintenance. $$\begin{array} {  c c r } 
& \text { Cost } & \text { Units Produced } \
\text { January } & \$ 130,000 & 25,000 \
\text { February } & 180,500 & 35,000 \
\text { March } & 151,100 & 28,000 \

\end{array}$$

Quizplus · Accepted Answer

The high-low method involves selecting the highest and lowest levels of activity and corresponding costs and using them to calculate the variable cost per unit and the fixed cost component.

Highest level of activity: 3,000 machine hours with maintenance costs of $24,000 
Lowest level of activity: 1,000 machine hours with maintenance costs of $12,000

Variable cost per unit: (24,000 - 12,000) / (3,000 - 1,000) = $6 per machine hour 
Fixed cost component: 24,000 - (6 x 3,000) = $6,000

Therefore, Notwen Company's monthly fixed costs for maintenance is $6,000, which corresponds to option C.

Given the Following Cost and Activity Observations for Notwen Company's