At an activity level of 4,500 machine-hours in a month, Novosel Corporation's total variable maintenance and repair cost is $394,830 and its total fixed maintenance and repair cost is $105,570. What would be the total maintenance and repair cost, both fixed and variable, at an activity level of 4,600 units in a month? Assume that this level of activity is within the relevant range.
A) $511,520
B) $505,960
C) $509,174
D) $500,400

Question

Quizplus · Accepted Answer

Using the high-low method:
Variable cost per machine-hour = (Total variable cost at high activity level - Total variable cost at low activity level) / (High activity level - Low activity level)
Variable cost per machine-hour = ($394,830 - $380,400) / (4,500 - 4,400)
Variable cost per machine-hour = $14.43

Total variable cost at 4,600 machine-hours:
Total variable cost = Variable cost per machine-hour x Activity level
Total variable cost = $14.43 x 4,600
Total variable cost = $66,378

Total maintenance and repair cost at 4,600 machine-hours:
Total cost = Fixed cost + Total variable cost
Total cost = $105,570 + $66,378
Total cost = $171,948
Therefore, the answer is C.

At an Activity Level of 4,500 Machine-Hours in a Month