Question

The following information is available for a company’s maintenance cost over the last seven months.

Month	Maintenance Hours			Maintenance Cost
June		10		$	3,950
July		19			5,390
August		11			4,110
September		14			4,590
October		20			5,550
November		23			6,030
December		5			3,150

Using the high-low method, estimate both the fixed and variable components of its maintenance cost.
  

High-Low method - Calculation of variable cost per maintenance hour Total cost at the high point Variable costs at the high point: Volume at the high point: Variable cost per maintenance hour Total variable costs at the high point Total fixed costs Total cost at the low point Variable costs at the low point: Volume at the low point: Variable cost per maintenance hour Total variable costs at the low point Total fixed costs

Answer 1

• High Low Method

	Months	Units	Cost
High Level	Nov	23	$                     6,030.00
Low Level	Dec	5	$                     3,150.00
Difference		18	$                     2,880.00

Total Cost at the high Point		$                   6,030.00
Variable cost at the high Point:
Volume at the high point	23
Variable cost per hour/unit	$          160.00
Total Variable cost at the high point		$                   3,680.00
Total Fixed Costs		$                   2,350.00
Total cost at the low point		$                   3,150.00
Variable cost at the Low Point:
Volume at Low Point	5
Variable cost per hour/unit	$          160.00
Total Variable cost at the low point		$                       800.00
Total Fixed Costs		$                   2,350.00