Electrical costs at one of Finfrock Corporation's factories are listed below: Management believes that electrical cost is a mixed cost that depends on machine-hours. Use the high-low method to estimate the variable and fixed components of this cost. Compute the variable component first, rounding off to the nearest whole cent. Then compute the fixed component, rounding off to the nearest whole dollar. Those estimates are closest to: (Round your intermediate calculations to 2 decimal places.)
A) $7.96 per machine-hour; $11,517 per month
B) $11.13 per machine-hour; $40,510 per month
C) $9.61 per machine-hour; $5,533 per month
D) $0.13 per machine-hour; $40,246 per month

Question

Electrical costs at one of Finfrock Corporation's factories are listed below:  Management believes that electrical cost is a mixed cost that depends on machine-hours. Use the high-low method to estimate the variable and fixed components of this cost. Compute the variable component first, rounding off to the nearest whole cent. Then compute the fixed component, rounding off to the nearest whole dollar. Those estimates are closest to: (Round your intermediate calculations to 2 decimal places.)
A) $7.96 per machine-hour; $11,517 per month 
B) $11.13 per machine-hour; $40,510 per month 
C) $9.61 per machine-hour; $5,533 per month 
D) $0.13 per machine-hour; $40,246 per month

Quizplus · Accepted Answer

11eacbfc_c8a9_a785_8ffe_9b1a5eb0cac7_TB7552_00 Variable cost per unit = Change in cost ÷ Change in activity
= $438 ÷ 55 machine-hours
= $7.96 per machine-hour
Fixed cost = Total cost - Variable cost element
= $40,706 - ($7.96 per machine-hour × 3,667 machine-hours)
= $40,706 - $29,189
= $11,517

Electrical Costs at One of Finfrock Corporation's Factories Are Listed