Banff Company manufactures snowboards. The management accountant wants to calculate the fixed and variable costs associated with the leasing of machinery. Data for the past four months were collected. $\begin{array}{lrr}& & \text { Machine } \
\text { Month } &\text { Lease cost } & \text { hours }\
\text { April } & \$ 21,000 & 550 \
\text { May } & 16,500 & 420 \
\text { June } & 19,000 & 510 \
\text { July } & 22,230 & 570
\end{array}$
-Refer to the Figure.Which of the following is the variable rate for the lease cost when using the high-low method?
A)$37.25
B)$38.18
C)$38.20
D)$61.50

Question

Quizplus · Accepted Answer

The high-low method calculates the variable rate by taking the difference in costs and dividing by the difference in activity levels. Here, the highest cost is $22,230 (570 hours) and the lowest is $16,500 (420 hours). The variable rate is ($22,230 - $16,500) / (570 - 420) = $38.20 per hour.

Banff Company Manufactures Snowboards -Refer to the Figure