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. $\begin{array}{|l|l|l|}
\hline & \text { Cost } & \text { Units Produced } \
\hline \text { January } & \$ 130,000 & 25,000 \
\hline \text { Febuary } & 180,500 & 35,000 \
\hline \text { March } & 151,100 & 28,000 \
\hline & &
\end{array}$

Question

Quizplus · Accepted Answer

Using the high-low method, we first find the variable cost per unit:
Variable cost per unit = Change in Total Cost ÷ Change in Activity 
= ($28,000 - $16,000) ÷ (8,000 - 4,000) 
= $12,000 ÷ 4,000 
= $3

Next, we can use either the high or low point to compute the fixed cost. Let's use the high point of 8,000 units:
Total cost at high point = Variable cost per unit × Number of units + Fixed cost 
$28,000 = $3 × 8,000 + Fixed cost 
$28,000 = $24,000 + Fixed cost 
Fixed cost = $28,000 - $24,000 
Fixed cost = $4,000

Therefore, the monthly fixed cost for maintenance is $3,750 (Choice C).

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