CALCU Exercise 11-5 (Part Level Submission) The controller of Hall Industries ha

Question

CALCU Exercise 11-5 (Part Level Submission) The controller of Hall Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance cost Total Total Month Maintenance Costs Machine Hours $2,010 2,280 2,520 3,078 2,300 3,180 January February March April May June 4,550 5,200 7,800 10,270 6,500 10,400 (al) Determine the variable-cost components using the high-low method. (Round variable cost to 2 decimal places e.g. 12.25.) Variable cost per machine hour Show Work is REQUIRED for this question: Open Show Work att LINK TO TEXT LINK TO TEX VIDEO: APPLIED SKILLS

Explanation / Answer

High-Low Method

Variable Cost per Unit

Variable cost per unit is calculated using the following formula:

Where,
y2 is the total cost at highest level of activity;
y1 is the total cost at lowest level of activity;
x2 are the number of units/machine hours etc. at highest level of activity; and
x1 are the number of units/machine hours etc. at lowest level of activity

The variable cost per unit is equal to the slope of the cost volume line (i.e. change in total cost ÷ change in number of units produced).

We have,
at highest activity: x2 = 10,400; y2 = $3,180
at lowest activity: x1 = 4,550; y1 = $2,010

Variable Cost per Unit = ($3,180 $2,010) ÷ (10,400 4,550) = $0.2 per unit

Variable Cost per Unit = y2 y1 x2 x1

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