Swan, 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 variable cost per machine hour is the difference between the total cost per machine hour at the high and low levels of activity, divided by the difference in activity levels. In this case, the variable cost per machine hour is ($33.40 - $30.40) / (25,000 - 22,000) = $8.40.

Swan, IncUses the High-Low Method to Analyze Cost Behavior