Exercise 18-5 (Part Level Submission) The controller of Hall Industries has coll

Question

Exercise 18-5 (Part Level Submission) The controller of Hall Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs Total Machine Hours 4,140 4,732 7,098 9346 5,915 9,464 Total Maintenance Costs Month January February March April May June $3,123 3,549 4,259 5,323 3,786 5,465 (a1) 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 (a2) Determine the fixed cost components using the high-low method. (Round answer to 0 decimal places e.g. 2,520.) Fixed costs

Explanation / Answer

Variable cost per machine hour=[Total cost at highest level-Total cost at lowest level]/(Highest level-Lowest level)

=(5465-3123)/(9464-4140)=$0.44(Approx)

Fixed cost=5465-(0.44*9464)=$1302(Approx)(Please note that intermediate calculations have not been rounded off].

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