Glascro Company manufactures skis. The management accountant wants to calculate the fixed and variable costs associated...

Glascro Company manufactures skis. The management accountant wants to calculate the fixed and variable costs associated with the leasing of machinery. Data for the past four months were collected as follows:

Month	Lease cost	Machine hours
April	$15,000	800
May	10,000	600
June	12,000	770
July	16,000	1,000

Using the high-low method, calculate the fixed cost of leasing.

a.$1,500

b.$2,500

c.$1,000

d.$2,000

Expert Solution

Correct answer----------(c) $1,000

Working

		Cost	No. of activities
A	High Level	$ 16,000.00	1000
B	Low Level	$ 10,000.00	600
C=A-B	Difference	$ 6,000.00	$ 400.00

A	Cost difference	$ 6,000.00
B	No. of activities difference	400
C=A/B	Variable cost per unit	$ 15.000

		High Level	Low Level
A	No. of activities	1000	600
B	Variable cost per unit	$ 15.0000	$ 15.0000
C=AxB	Total Variable cost	$ 15,000.00	$ 9,000.00
D	Total cost	$ 16,000.00	$ 10,000.00
E=D-C	Total fixed cost	$ 1,000.00	$ 1,000.00

ekkarill92 answered 2 years ago

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