Question

QS 18-3 Cost behavior estimation-high-low method LO P1 The following information is available for a company's maintenance cost over the last seven months Units Produced 100 Month June July August September October November December 190 110 140 200 230 Maintenance cost $ 5,250 7.850 5.540 6,41e 8.15 9.02e 3,800 Using the high-low method, estimate both the fixed and variable components of its maintenance cost High Low method - Calculation of variable cost per maintenance hour Total cost at the high point Variable costs at the high point Volume at the high point Variable cost per unit produced Total variable costs at the high point Total fred costs Total cost at the low point Variable costs at the low point Volume at the low point Variable cost per unit produced Total variable costs at the low point Total fixed costs

Answer 1

(1)

Variable cost per unit = (highest activity cost - lowest activity cost)/(highest activity units - lowest activity units)

= ($9020 - $3800)/(230 - 50)

= $29

(2)

Total cost at the high point		$9020
Variable costs at the high point
Volume at the high point	230
Variable cost per unit produced	$29
Total variable costs at the high point		$6670
Total fixed costs		$2350

(3)

Total cost at the low point		$3800
Variable costs at the low point
Volume at the low point	50
Variable cost per unit produced	$29
Total variable costs at the low point		$1450
Total fixed costs		$2350