Month Total Monthly Utility Costs Total Direct Labor Hours January $4,500 7,900

Question

Month             Total Monthly Utility Costs              Total Direct Labor Hours

January                        $4,500                                                 7,900

February                      4,900                                                 8,000

April                            2,900                                                 3,000

May                             3,600                                                 6,000

June                             3,200                                                 5,00

July                              3,000                                                 4,000

Using the High/Low method, calculate the fixed and variable cost components for monthly utilities using the above information.

Explanation / Answer

highest:

feb: 4900 8000

lowest:

AprilL : 2900 3000

variable cost per direct labor hour = (4900-2900)/(8000 - 3000) = 0.4 per direct labor hour

fixed cost per direct labor hour = 4900 + 0.4 * 8000 = 8100

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