July 2 High Low Mixed Cost Analysis.xlsx Manufacturing Industries uses the high-

Question

July 2 High Low Mixed Cost Analysis.xlsx Manufacturing Industries uses the high-low method to analyze cost behavior. The accountants have determined that machine hours best explain the company's maintenance costs on the production equipment. Relevant range of activity: The following data are available for the first six months of the most recent year Low High 200 900 Month Janua February S March April Total Total 2,900 3,000 3,600 4,300 3,200 4,500 300 400 600 790 500 800 av June Instructions: Showing work in good fornm 1 Compute the variable maintenance cost per machine hour 2 Compute the fixed maintenance cost per month 3 Using the high-low method, compute the estimated maintenance cost associated with this numbeer of machine hours 580

Explanation / Answer

Cost Machine hours High level of activity 4500 800 Low level of activity 2900 300 Difference 1600 500 1 Variable maintenance cost per machine hour = 1600/500 = $3.2 2 Fixed maintenance cost = 4500-(800*3.2)= $1940 3 Estimated maintenance cost = 1940+(580*3.2)= $3796

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