The controller of Norton Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs.
| Month | Total Maintenance Costs |
Total Machine Hours |
|||
| January | $2,730 | 330 | |||
| February | 3,030 | 380 | |||
| March | 3,630 | 530 | |||
| April | 4,530 | 660 | |||
| May | 3,230 | 530 | |||
| June | 5,790 | 730 | |||
Determine the variable cost components using the high-low method. (Round variable cost to 3 decimal places e.g. 12.250.)
| Variable cost per machine hour | $ |
Determine the fixed components using the high-low method. (Round answer to 0 decimal places e.g. 2,520.)
| Total fixed costs | $ |
High – low method breaks down cost by defining the relationship of cost between the highest and lowest activity.
variable cost = cost of highest activity less cost of lowest activity / highest activity less lowest activity
= 5790-2730 /730-330
=3060/40
=7.65
For january
Total Cost =2730
Fixed cost: 2730 – (7.65*330)
Fixed cost =203
Another try: June cost
$5790 less 5584.5
= $206 = fixed cost
