Swan, Inc. uses the high-low method to analyze cost behavior. The company observed that at 20,000 machine hours of activity, total maintenance costs averaged $37.30 per hour. When activity jumped to 25,000 machine hours, which was still within the relevant range, the average total cost per machine hour was $31.30.

Question

Business

Terrance Donovan

Today, 07:59

Swan, Inc. uses the high-low method to analyze cost behavior. The company observed that at 20,000 machine hours of activity, total maintenance costs averaged $37.30 per hour. When activity jumped to 25,000 machine hours, which was still within the relevant range, the average total cost per machine hour was $31.30.

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Britney Powell · Answer 1

7.3

Explanation:

37.30 * 20,000 = $746,000

31.30 * 25000 = $782,500

$746,000-$782,500 = $36,500

36,500 / 5,000 = 7.3

Note:

25,000-20 000 = 5,000