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6 July, 04:45

The controller of Sunland Production has collected the following monthly expense data for analyzing the cost behavior of electricity costs.

Total Electricity Costs Total Machine Hours

January $2,480 220

February 2,970 360

March 3,570 450

April 4,740 685

May 3,240 400

June 4,870 750

July 4,120 650

August 3,850 580

September 5,010 665

October 4,350 610

November 3,350 360

December 6,330 770

Determine the fixed - and variable-cost components using the high-low method.

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  1. 6 July, 08:13
    0
    maintenance costs are $940 per month plus $7 per machine hour.

    Explanation:

    Base on the scenario been described in the question, we use the following method to solve this

    Maintenance cost = (6,330 - 2480) / 770-220

    Maintenance cost per machine = 3850/550

    Maintenance cost per machine = $7

    Hours 300 Machine Hours Total costs Less: Variable costs 770 X $7 220 X $7

    Total fixed costs $6,330 $5,390 $ 940 $2,480 1,540 $ 940 Therefore, maintenance costs are $940 per month plus $7 per machine hour.
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