Lake Louise Company makes treadmills. The company controller wants to calculate the fixed and variable costs associated with the janitorial costs incurred in the factory. Data for the past four months were collected. $\begin{array}{lrr}& \text { Janitorial } & \text { Machine } \
\text { Month } &\text { costs } & \text { hours }\
\text { September } & \$ 11,000 & 575 \
\text { October } & 11,400 & 610 \
\text { November } & 10,200 & 510 \
\text { December } & 10,725 & 550
\end{array}$
-Refer to the Figure.What would be the fixed cost of the janitorial services when using the high-low method?
A)$4,080
B)$7,320
C)$6,120
D)$11,000

Question

Quizplus · Accepted Answer

The fixed cost of the janitorial services when using the high-low method is $4,080. This is calculated by taking the difference between the highest and lowest janitorial costs and dividing by the difference between the highest and lowest machine hours. In this case, the highest janitorial cost is $11,400 and the lowest janitorial cost is $10,200. The difference between these two costs is $1,200. The highest machine hours is 610 and the lowest machine hours is 510. The difference between these two hours is 100. Therefore, the fixed cost of the janitorial services is $1,200 / 100 = $4,080.

Lake Louise Company Makes Treadmills -Refer to the Figure