The controller of Oriole Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs.
Month Total Total
Maintenance Costs Machine Hours
January $2,860 320
February 3,160 370
March 3,760 520
April 4,660 670
May 3,360 520
June 5,260 720
Determine the variable cost components using the high-low method. (Round answer to 2 decimal places e.g. 2.25.)
Variable cost per machine hour $
Determine the fixed cost components using the high-low method.
Total fixed costs $

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facundobuzzetti facundobuzzetti · Answer 1 · 2021-07-02T20:30:30+02:00

Answer:

Results are below.

Explanation:

Giving the following information:

Maintenance Costs Machine Hours

January $2,860 320

February 3,160 370

March 3,760 520

April 4,660 670

May 3,360 520

June 5,260 720

To calculate the variable and fixed costs, we need to use the following formulas:

Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)

Variable cost per unit= (5,260 - 2,860) / (720 - 320)

Variable cost per unit= $6

Fixed costs= Highest activity cost - (Variable cost per unit * HAU)

Fixed costs= 5,260 - (6*720)

Fixed costs= $940

Fixed costs= LAC - (Variable cost per unit* LAU)

Fixed costs= 2,860 - (6*320)

Fixed costs= $940