Cosby Company is attempting to develop the cost function for repair costs. The following past data are available: Machine Hours Repair Costs
4,800 $6,385
3,400 4,585
4,000 5,285
5,900 7,085
Using the high-low method, what is the variable repair cost per machine hour?
A)$0.15
B)$1.00
C)$4.00
D)$5.00

Question

Quizplus · Accepted Answer

The high-low method calculates the variable cost per unit by taking the difference in costs between the highest and lowest activity levels and dividing by the difference in activity levels. Here, the difference in repair costs is $7,085 - $4,585 = $2,500, and the difference in machine hours is 5,900 - 3,400 = 2,500. Thus, the variable cost per machine hour is $2,500 / 2,500 = $1.00.

Cosby Company Is Attempting to Develop the Cost Function for Repair