Assuming Comco uses the high-low method of analysis, the fixed cost of maintenance would be estimated to be:
A)$14,500
B)$5,020
C)$13,000
D)$12,320

Question

Quizplus · Accepted Answer

The high-low method involves using the highest and lowest levels of activity (in this case, machine hours) to estimate fixed and variable costs. From the information given, the highest level of machine hours is 7,500 and the lowest is 2,500. 
Using the formula:
Variable cost per unit = (High cost – Low cost) / (High activity – Low activity)
= ($49,500 - $29,000) / (7,500 - 2,500)
= $4 per machine hour

To find the fixed cost, we can use either the high level of activity or the low level, plus the variable cost per unit. Using the high level:
Fixed cost = Total cost – (Variable cost per unit x Activity level)
= $49,500 – ($4 x 7,500)
= $19,500

Therefore, the estimated fixed cost of maintenance is $13,000 (Option C).

Assuming Comco Uses the High-Low Method of Analysis, the Fixed