Given the following cost and activity observations for Leno Enterprises' utilities, use the high-low method to calculate Leno's variable utilities cost per machine hour. $\begin{array}{lrr}
& \text { Cost } & \text { Machine Hours } \
\text { September } & \$ 4,100 & 22,000 \
\text { October } & 3,700 & 18,000 \
\text { November } & 3,900 & 19,000 \
\text { December } & 4,500 & 28,000 \
\hline
\end{array}$
A) $0.08
B) $4.86
C) $0.25
D) $12.50

Question

Given the following cost and activity observations for Leno Enterprises' utilities, use the high-low method to calculate Leno's variable utilities cost per machine hour. $\begin{array}{lrr} 
& \text { Cost } & \text { Machine Hours } \
\text { September } & \$ 4,100 & 22,000 \
\text { October } & 3,700 & 18,000 \
\text { November } & 3,900 & 19,000 \
\text { December } & 4,500 & 28,000 \
\hline
\end{array}$
A) $0.08
B) $4.86
C) $0.25
D) $12.50

Quizplus · Accepted Answer

The high-low method uses the highest and lowest activity levels to estimate variable cost per unit. The highest machine hours are 28,000 (December) and the lowest are 18,000 (October). The cost difference is $4,500 - $3,700 = $800. The machine hour difference is 28,000 - 18,000 = 10,000. Variable cost per machine hour = $800 / 10,000 = $0.08.

Given the Following Cost and Activity Observations for Leno Enterprises