At an activity level of 8,300 machine-hours in a month, Baudry Corporation's total variable maintenance cost is $220,448 and its total fixed maintenance cost is $556,764. What would be the total variable maintenance cost at an activity level of 8,600 machine-hours in a month? Assume that this level of activity is within the relevant range.
A)$777,212
B)$220,448
C)$576,888
D)$228,416

Question

Quizplus · Accepted Answer

Using the high-low method, we can find the variable cost per machine-hour:
Variable cost per machine-hour = (Total cost at high activity level - Total cost at low activity level) / (High activity level - Low activity level)
Variable cost per machine-hour = ($777,212 - $796,212) / (8,600 - 8,300) = $20

Then, we can use the variable cost per machine-hour to find the total variable maintenance cost at the new activity level:
Total variable maintenance cost = Variable cost per machine-hour x Activity level
Total variable maintenance cost = $20 x 8,600 = $172,000

Adding the total fixed maintenance cost, we get:
Total maintenance cost = Total variable maintenance cost + Total fixed maintenance cost
Total maintenance cost = $172,000 + $556,764 = $728,764

Therefore, the total variable maintenance cost at an activity level of 8,600 machine-hours in a month is $172,000.
The correct answer is D.

At an Activity Level of 8,300 Machine-Hours in a Month