Question

Given the following cost and activity observations for Bounty Company's utilities, use the high-low method to calculate Bounty's variable utilities cost per machine hour. Round to the nearest cent.

Cost Machine Hours

March $3,091 14,557

April 2,637 9,654

May 2,804 11,926

June 3,899 18,355

Answer 1

Variable cost under High-Low method = (Cost at highest level of machine hours - Cost at lowest level of machine hours) / (Highest machine hours - Lowest Machine hours)

Variable cost under High-Low method = ($3,899 - $2,637) / (18,355-9,654)

Variable cost under High-Low method = $1,262 / 8,701

Variable cost under High-Low method = $0.1

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