Assuming Comco uses the high-low method of analysis, if machine hours are budgeted to be 20,000 hours then the budgeted total maintenance cost would be expected to be:
A)$25,400
B)$25,560
C)$23,700
D)$24,720

Question

Quizplus · Accepted Answer

The high-low method of analysis is used to estimate the variable cost per unit. The variable cost per unit is calculated by dividing the difference between the total cost at the high level of activity and the total cost at the low level of activity by the difference between the high level of activity and the low level of activity. In this case, the total cost at the high level of activity is $25,560 and the total cost at the low level of activity is $23,700. The difference between the high level of activity and the low level of activity is 20,000 hours. Therefore, the variable cost per unit is $25,560 - $23,700 / 20,000 hours = $0.92. The budgeted total maintenance cost would be expected to be $0.92 * 20,000 hours = $25,400.

Assuming Comco Uses the High-Low Method of Analysis, If Machine