Question

Month Expense Hours Month Expense Hours 1 $2,625 1,499 7 $2,865 1,785 2 2,670 1,590 8 2,905 1,805 3 2,720 1,605 9 2,780 1,695 4 2,822 1,655 10 2,570 1,410 5 2,855 1,775 11 2,590 1,550 6 3,005 1,880 12 2,890 1,405 What is the cost equation for maintenance cost using the high-low method

Answer 1

Total cost= 1,266 + 0.925*hour

Step-by-step explanation:

Giving the following information:

Month Expense Hours

1 $2,625 1,499

2 2,670 1,590

3 2,720 1,605

4 2,822 1,655

5 2,855 1,775

6 3,005 1,880

7 $2,865 1,785

8 2,905 1,805

9 2,780 1,695

10 2,570 1,410

11 2,590 1,550

12 2,890 1,405

To determine the total cost formula under the high-low method, we need to use the following formulas:

Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)

Variable cost per unit= (3,005 - 2,570) - (1,880 - 1,410)

Variable cost per unit= $0.925

Fixed costs= Highest activity cost - (Variable cost per unit * HAU)

Fixed costs= 3,005 - (0.925*1,880)

Fixed costs= $1,266

Fixed costs= LAC - (Variable cost per unit* LAU)

Fixed costs= 2,570 - (0.925*1,410)

Fixed costs= 1,266

Total cost= 1,266 + 0.925*hour