Slonaker Inc. has provided the following data concerning its maintenance costs:
Machine-Hours |
Maintenance Cost |
|
April | 5,799 | $30,379 |
May | 5,782 | $30,289 |
June | 5,764 | $30,237 |
July | 5,761 | $30,233 |
August | 5,717 | $30,078 |
September | 5,795 | $30,360 |
October | 5,809 | $30,388 |
November | 5,801 | $30,378 |
December | 5,785 | $30,318 |
Management believes that maintenance cost is a mixed cost that depends on machine-hours. |
Required: |
Estimate the variable cost per machine-hour and the fixed cost per month using the high-low method. (Round your answers to 2 decimal places. Omit the "$" sign in your response.) |
Variable Cost per machine hour | = | 3.37 | ||
Fixed Cost | = | 10,811.67 | ||
Machine-Hours | Maintenance Cost | |||
High | 5809 | $ 30,388 | ||
Low | 5717 | $ 30,078 | ||
Change | 92 | $ 310 | ||
Variable Cost | = | Change in Cost / Change in Activity | ||
= | $310 / 92 | |||
= | $ 3.37 | per machine hour | ||
Fixed Cost element | = | Total Cost - Variable Cost element | ||
= | $30,388 - ($3.37 X 5,809) | |||
= | $ 10,811.67 | |||
Alternatively, Fixed cost | = | $30,078 - ($3.37 X 5,717) | ||
= | $ 10,811.71 |
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