Question

How is the answer 0.45 When I do High to low I get 0.57 where am I going wrong

Maintenance costs at Red Dot Manufacturing over the past six months are listed in the following table. Month Maintenance cost Machine hours January $9,500 15,800 February $9,860 17,300 March $8,600 14,500 April $8,840 16,100 May $8,600 17,100 June $8,100 15,500 Using the high low method, what is the variable maintenance cost per machine hour at Red Dot Manufacturing? Select one: O a. $0.45 O b. $0.59 O C. $2.22 d. $0.57 x

Answer 1

Answer

• Correct Answer = Option ‘A’ $ 0.45

	Months	Machine hours	Maintenance Cost
High Level	Feb	17,300	$                     9,860.00
Low Level	Mar	14,500	$                     8,600.00
Difference		2,800	$                     1,260.00
A	Difference in Cost		$                     1,260.00
B	Difference in hours		2,800
C = A/B	Variable cost per unit		$                           0.450

• That’s how you get $ 0.45 as Variable cost.