Question

In the Bonita, maintenance costs are a mixed cost. At the low level of activity (100 direct labor hours), maintenance costs are $1200. At the high level of activity (400 direct labor hours), maintenance costs are $2200. Using the high-low method, what is the variable maintenance cost per unit and the total fixed maintenance cost?

Variable Cost Per Unit

Total Fixed Cost

$3.33

$1000

$3.33

$868

$5.50

$275

$5.50

$2600

Answer 1

*HAC = Highest Activity Cost ( $2,200 )

LAC = Lowest Activity Cost ( $1,200 )

HAU = Highest Activity Units ( 400 )

LAU = Lowest Activity Units. ( 100 )

High - low method :

1. Variable Cost per unit ( VCU ):

=> ( HAC - LAC) / ( HAU - LAU)

=> ( $2,200 - $1,200 ) / ( 400 - 100 )

=> $1,000 / 300

=> $3.33

2.​​​​ Total Fixed Cost ( TFC ) :

=> HAC - ( VCU x HAU )

=> $2,200 - ( $3.33 x 400 )

=> $2,200 - $1,332

=> $868

_ _ _ x _ _ _

ALL THE BEST

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