Given the following cost and activity observations for Notwen Company's maintenance costs, use the high-low method to calculate Notwen's monthly fixed costs for maintenance. $\begin{array}{|crr|}
\hline & \text { Cost } & \text { Units Produced } \
\text { January } & \$ 130,000 & 25,000 \
\text { February } & 180,500 & 35,000 \
\text { March } & 151,100 & 28,000 \
\hline
\end{array}$
A) $11,250
B) $4,550
C) $3,750
D) $2,650

Question

Quizplus · Accepted Answer

The high-low method uses the highest and lowest activity levels to estimate fixed and variable costs. The variable cost per unit is calculated as (180,500 - 130,000) / (35,000 - 25,000) = $5.05. The fixed cost is then calculated using either the high or low point: Fixed cost = Total cost - (Variable cost per unit * Units produced). Using the high point: 180,500 - (5.05 * 35,000) = $3,750.

Given the Following Cost and Activity Observations for Notwen Company's