Question

Felinas Inc. produces floor mats for cars and trucks. The owner, Kenneth Felinas, asked you to assist him in estimating his maintenance costs. Together, Mr. Felinas and you determined that the single best cost driver for maintenance costs was machine hours. Below are data from the previous fiscal year for maintenance expense and machine hours:

Month	Maintenance Expense			Machine Hours
1	$	3,460			2,370
2		3,650			2,470
3		3,830			2,570
4		3,960			2,600
5		3,960			2,450
6		4,360			2,500
7		3,950			2,590
8		3,760			2,560
9		3,480			2,380
10		3,100			2,250
11		2,950			1,660
12		3,220			2,240

Using the high-low method, total monthly fixed cost is calculated to be:

Multiple Choice

• $296.

• $224.

• $460.

• $162.

• $552.

Answer 1

Correct answer---------$162

Working

		Cost	No. of activities
A	High Level	$             4,360.00	2500
B	Low Level	$             2,950.00	1660
C=A-B	Difference	$             1,410.00	$                  840.00
A	Cost difference	$             1,410.00
B	No. of activities difference	840
C=A/B	Variable cost per unit	$                   1.679
		High Level	Low Level
A	No. of activities	2500	1660
B	Variable cost per unit	$                1.6790	$                  1.6790
C=AxB	Total Variable cost	$             4,197.50	$              2,787.14
D	Total cost	$             4,360.00	$              2,950.00
E=D-C	Total fixed cost	$                162.50	$                  162.86