You have calculated,using the high-low method,a variable cost per machine hour of $0.80 for your production power costs.Power costs at 6,000 machine hours are $5,400;at 9,000 machine hours,they are $7,800.What are the total fixed costs that you would use to estimate production power costs for your company at any level within your relevant range?
A)$600
B)$6,400
C)$2,400
D)$4,800

Question

Quizplus · Accepted Answer

The high-low method calculates fixed costs by subtracting the total variable cost at either the high or low level of activity from the total cost at that level. At 6,000 hours, variable costs are 6,000 * $0.80 = $4,800. Fixed costs are $5,400 - $4,800 = $600.

You Have Calculated,using the High-Low Method,a Variable Cost Per Machine