Question

The following information is available for a company’s maintenance cost over the last seven months.

Month	Maintenance Hours			Maintenance Cost
June		9		$	5,450
July		18			6,900
August		12			5,100
September		15			6,000
October		21			6,900
November		24			8,100
December		6			3,600

Using the high-low method, estimate both the fixed and variable components of its maintenance cost.

High-Low method - Calculation of variable cost per maintenance hour
Total cost at the high point
Variable costs at the high point:
Volume at the high point:
Variable cost per maintenance hour
Total variable costs at the high point
Total fixed costs
Total cost at the low point
Variable costs at the low point:
Volume at the low point:
Variable cost per maintenance hour
Total variable costs at the low point
Total fixed costs

Answer 1

Solution:

High-Low Method- calculation of Variable cost per maintenance hour
Change in cost	(Cost at high Point - Cost at low Point) ($8100-$3600)		$4,500	Variable cost per unit ($4500/18)	$250
Change in Volume	(Volume at high Point - Volume at Low Point) (24-6)		18
Total cost at high point		$8,100
Variable cost at high point:
Volume at high point	24
Variable cost per maintenance hour	$250
Total variable cost at high point		$6,000
Total Fixed costs		$2,100
Total cost at Low point		$3,600
Variable cost at Low point:
Volume at Low point	6
Variable cost per maintenance hour	$250
Total variable cost at Low point		$1,500
Total Fixed costs		$2,100