The following data relate to the Torrence Company for May and August:

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May and August were the lowest and highest activity levels, and Torrence uses the high-low method to analyze cost behavior. If maintenance hours are estimated to be 26,000 hours in October, which of the following statements is true?
A) Total maintenance costs will be $1,175,000.
B) Total maintenance costs will be $1,182,000.
C) Total maintenance costs will be $1,193,000.
D) Total maintenance costs will be $1,221,000.
E) Total maintenance costs will be $1,247,000.

Question

The following data relate to the Torrence Company for May and August:

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May and August were the lowest and highest activity levels, and Torrence uses the high-low method to analyze cost behavior. If maintenance hours are estimated to be 26,000 hours in October, which of the following statements is true?
A) Total maintenance costs will be $1,175,000. 
B) Total maintenance costs will be $1,182,000. 
C) Total maintenance costs will be $1,193,000. 
D) Total maintenance costs will be $1,221,000. 
E) Total maintenance costs will be $1,247,000.

Quizplus · Accepted Answer

The high-low method calculates variable cost per unit and fixed costs using the highest and lowest activity levels. Using these, the total cost for 26,000 hours can be calculated, resulting in $1,193,000.

The Following Data Relate to the Torrence Company for May