Bell Company has provided the following data for maintenance costs: Using the high-low method,the cost formula for maintenance cost would be:
A)$2.00 per machine hour
B)$1.625 per machine hour
C)$18,000 plus $0.50 per machine hour
D)$24,000 plus $0.50 per machine hour

Question

Bell Company has provided the following data for maintenance costs:  Using the high-low method,the cost formula for maintenance cost would be:
A)$2.00 per machine hour 
B)$1.625 per machine hour 
C)$18,000 plus $0.50 per machine hour 
D)$24,000 plus $0.50 per machine hour

Quizplus · Accepted Answer

Variable cost = Change in cost F1F1F1S1F1F1F10 Change in activity
= ($26,000 - $24,000) F1F1F1S1F1F1F10 (16,000 - 12,000) = $0.50
Fixed cost element = Total cost - Variable cost element
= $26,000 - ($0.50 F1F1F1S1F1F1F10 16,000) = $18,000
Therefore,the cost formula for total maintenance cost is $18,000 per period plus $0.50 per machine-hour,or Y = $18,000 + $0.50X.

Bell Company Has Provided the Following Data for Maintenance Costs