At an activity level of 6,000 units the cost for maintenance is $7,200 and at 10,000 units the cost for maintenance is $11,600. Using the high-low method, the cost formula for maintenance is:
A) $1.20 per unit
B) $1.16 per unit
C) $1,200 plus $1.10 per unit
D) $600 plus $1.10 per unit

Question

Quizplus · Accepted Answer

The variable cost per unit is ($11,600 - $7,200) / (10,000 - 6,000) = $1.10. The fixed cost is calculated as $7,200 - ($1.10 * 6,000) = $600. Thus, the cost formula is $600 plus $1.10 per unit.

At an Activity Level of 6,000 Units the Cost for Maintenance