Glascro Company manufactures skis.The management accountant wants to calculate the fixed and variable costs associated with the leasing of machinery.Data for the past four months were collected as follows:

What would be the total lease cost of Glascro Company's at a level of 500 machine hours?
A) $16,000
B) $8,500
C) $20,000
D) $17,450

Question

Glascro Company manufactures skis.The management accountant wants to calculate the fixed and variable costs associated with the leasing of machinery.Data for the past four months were collected as follows:  
  
What would be the total lease cost of Glascro Company's at a level of 500 machine hours?
A) $16,000 
B) $8,500 
C) $20,000 
D) $17,450

Quizplus · Accepted Answer

Variable Rate = (High Point Cost - Low Point Cost) / (High Point Output - Low Point Output)
Variable rate = ($16,000 - $10,000) / (1,000 - 600) = $15
Fixed Cost = Total Cost at High Point - (Variable Rate × Output at High Point)
Fixed cost = $16,000 - ($15× 1,000) = $1,000
OR
Fixed cost = $10,000 - ($15 × 600) = $1,000
Total Cost = Total Fixed Cost + Total Variable Cost = $1,000 + ($15 × 500) = $8,500

Glascro Company Manufactures Skis