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High-Low Method The highest and lowest levels of activity for the Felton Company were 58,000 direct labor hours and 42,000 di

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Answer #1
Direct Labor Hours Maintenance cost
58000 $          3,36,000.00
42000 $          3,04,000.00
1) Direct Labor Hours Maintenance cost
High Level of Activity(A) 58000 $          3,36,000.00
Low Level of Activity(B) 42000 $          3,04,000.00
Change(A)-(B) 16000 $              32,000.00
Variable cost per Direct Labor Hours=Change in Maintenance cost/Change in Direct Labor hour
Variable cost per Direct Labor hour=($32000/16000) $                                2.00
Total Cost at High level of activity=(A) $                  3,36,000.00
Variable cost (58000*$2)=(B) $                  1,16,000.00
Fixed Cost(A)-(B) $                  2,20,000.00
Total Cost=$220000+$2*58000
2) Cost at operating level of 52000 Direct Labor hours=(Fixed cost+Variable cost per direct labor hours*Direct labor Hour)=$220000+$2*52000 $                  3,24,000.00
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