Use the following information to answer the following QuestionsSwan, Inc. uses the high-low method to analyze cost behavior. The company observed that at 22,000 machine hours of activity, total maintenance costs averaged $33.40 per hour. When activity jumped to 25,000 machine hours, which was still within the relevant range, the average total cost per machine hour was $30.40.
-On the basis of this information, the variable cost per machine hour for Swan was:
A) $8.40.
B) $22.00.
C) $25.00.
D) $30.40.
E) $33.40.

Question

Quizplus · Accepted Answer

The high-low method calculates the variable cost per unit by taking the difference in total costs at the high and low activity levels and dividing by the difference in activity levels. Here, the difference in total costs is ($30.40 * 25,000) - ($33.40 * 22,000) and the difference in machine hours is 25,000 - 22,000. The variable cost per machine hour is $8.40.

Use the Following Information to Answer the Following QuestionsSwan, Inc