At the high level of activity in November, 7,000 machine hours were run and power costs were $16,000.In April, a month of low activity, 2,000 machine hours were run and power costs amounted to $8,000.Using the high-low method, the estimated fixed cost element of power costs is
A)$16,000.
B)$8,000.
C)$4,800.
D)$11,200.

Question

Quizplus · Accepted Answer

The high-low method calculates the variable cost per machine hour first: ($16,000 - $8,000) / (7,000 - 2,000) = $1.60 per machine hour. Then, using either the high or low activity level, the fixed cost is calculated: $16,000 - ($1.60 * 7,000) = $4,800.

At the High Level of Activity in November, 7,000 Machine