The following data pertains to activity and maintenance cost for two recent periods:
Maintenance cost is a mixed cost with both fixed and variable components.Using the high-low method,the cost formula for maintenance cost is:
A) Y = $4.25 X
B) Y = $14,000 + $2.50 X
C) Y = $2,500 + $4.25 X
D) Y = $4.50 X

Question

The following data pertains to activity and maintenance cost for two recent periods:
 Maintenance cost is a mixed cost with both fixed and variable components.Using the high-low method,the cost formula for maintenance cost is:
A) Y = $4.25 X 
B) Y = $14,000 + $2.50 X 
C) Y = $2,500 + $4.25 X 
D) Y = $4.50 X

Quizplus · Accepted Answer

11ea7761_1884_a33d_81a5_b7b01faafd3e_TB2580_00 Variable cost per unit = Change in cost ÷ Change in activity
= $2,500 ÷ 1,000 units
= $2.50 per unit
Fixed cost = Total cost - Variable cost element
= $34,000 - ($2.50 per unit × 8,000 units)
= $34,000 - $20,000
= $14,000

The Following Data Pertains to Activity and Maintenance Cost for Two