Exercise 18-3 The controller of Norton Industries has collected the following mo

Question

Exercise 18-3 The controller of Norton Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs Total Maintenance Costs Month January February March April May June $2,700 3,000 3,600 4,500 3,200 5,500 Total Machine Hours 300 350 500 690 500 700 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 cost components using the high-low method. (Round answer to 0 decimal places e.g. 2,520.) Total fixed costs

Explanation / Answer

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

=(5500-2700)/(700-300)=$7 per machine hour

Fixed cost=5500-(7*700)=$600.

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