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Olsen Corporation manufactures skis. Data for the past four months related to the cost of maintenance...

Olsen Corporation manufactures skis. Data for the past four months related to the cost of maintenance on its machinery is given below: Month Machine Hours Maintenance Cost April 21,000 $26,020 May 18,500 $24,600 June 15,000 $22,300 July 19,000 $25,100 25. Using the high-low method of analysis, what is the fixed cost of maintenance on the machinery?

a. $14,500.

b. $5,020.

c. $13,000.

d. $12,320.

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Answer #1

Variable cost per unit=[Total cost at highest level-Total cost at lowest level]/(Highest level-Lowest level)

=(26020-22300)/(21000-15000)

=$0.62 per machine hour

Hence fixed cost=26020-(0.62*21000)

=$13000

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