Electrical costs at one of Gotch Corporation's factories are listed below: Management believes that electrical cost is a mixed cost that depends on machine-hours.Using the high-low method to estimate the variable and fixed components of this cost,these estimates would be closest to:
A)$0.15 per machine-hour;$35,115 per month
B)$9.11 per machine-hour;$1,249 per month
C)$9.43 per machine-hour;$35,406 per month
D)$6.57 per machine-hour;$10,728 per month

Question

Electrical costs at one of Gotch Corporation's factories are listed below:  Management believes that electrical cost is a mixed cost that depends on machine-hours.Using the high-low method to estimate the variable and fixed components of this cost,these estimates would be closest to:
A)$0.15 per machine-hour;$35,115 per month 
B)$9.11 per machine-hour;$1,249 per month 
C)$9.43 per machine-hour;$35,406 per month 
D)$6.57 per machine-hour;$10,728 per month

Quizplus · Accepted Answer

Variable cost = Change in cost F1F1F1S1F1F1F10 Change in activity
= ($35,694 - $35,044) F1F1F1S1F1F1F10 (3,800 - 3,701) = $6.57
Fixed cost element = Total cost - Variable cost element
= $35,694 - ($6.57 F1F1F1S1F1F1F10 3,800) = $10,728
Therefore,the cost formula for total electrical cost is $10,728 per period plus $6.57 per machine-hour,or Y = $10,728 + $6.57X

Electrical Costs at One of Gotch Corporation's Factories Are Listed