Question

Wayside Company has machine hours of 5,000 and machine costs ofS170,000 at the high data point. Machine hours are 2,000 and machine costs are S110,000 at the low data point. Wayside uses the high-low method to estimate costs.

1.Refer to Exhibit 5-4. What is the estimated cost per machine hour?
    $34
    $55
    $20
    $40
    None of the answer choices is correct.
2.Refer to Exhibit 5-4. What is the estimated total fixed cost?    $60,000
    $140,000
    $55,000
    $70,000
    None of the answer choices is correct.

  
  
3.Refer to Exhibit 5-4. What is the estimate of total machine costs at Wayside when 3,700 machine hours are used?
    $144,000
    $70,000
    $140,000
    $74,000
    None of the answer choices is correct.

Answer 1

1.

Variable cost per hour= (Highest activity cost - Lowest activity cost)/(Highest activity - Lowest activity)

=( 170,000-110,000)/(5,000-2,000)

= 60,000/3,000

= $20 per machine hour

The estimated cost per machine hour is $20

Third option is correct.

2.

Fixed cost = Highest activity cost - Highest activity x Variable cost per hour

= 170,000- 5,000 x 20

= 170,000-100,000

= $70,000

The estimated total fixed cost $70,000

Fourth option is correct

3.

The estimated total machine costs at Wayside when 3,700 machine hours are used

= Fixed cost + Variable cost per hour x Activity hour

= 70,000 + 20 x 3,700

= 70,000+74,000

= $144,000

1st option is correct.

Please give a positive rating if you are satisfied with this solution and if you have any query kindly ask.Thanks!!!