Question

Mixed cost formula Homework – Unanswered Cinco Corporation is a manufacturing company. They produce a wide range of products. They are able to sell well but do not have a great handle on their costs. Because of this, they are not able to plan accordingly and also not meeting their internal profit goals. To get a better handle on things, Cinco Corp controller Steve Brule has put you in charge to perform cost analysis. One cost they are having a particular hard time with projecting is maintenance cost of their machinery and equipment. Based on your understanding of cost behaviour and the data that is available you decide to use the high-low method to analyze the maintenance costs. Below is the data set you have assembled: Month Total maintenance cost Maintenance hours January $1,300 65 February $1,325 68 March $1,423 70 April $1,128 43 May $1,509 76 June $1,685 89 July $1,800 102 August $1,775 100 September $1,742 95 October $1,238 53 November $1,195 48 December $1,076 40 Instructions: Based on above data set and using the high-low method calculate the variable cost per unit (round to nearest cent). [ Fullscreer Numeric Answer:

Answer 1

Variable cost per unit = (Highest activity cost – Lowest activity cost)/(Highest activity hour – Lowest activity hour)

= (1,800 - 1,076)/(102 - 40)

= 724/62

= $11.68

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