Question

Mattey Publishing Company (Mattey) is a publisher of novels. The monthly equipment maintenance cost for Mattey is considered to be a mixed cost. The variable portion of the cost is related to the number of novels published. The production volume and maintenance costs for the past six months are presented below. Mattey uses the high-low method to separate mixed costs into its fixed and variable portions.

Month	Volume of Production (Number of Novels)	Equipment Maintenance Costs
February	215,000	$5,271
March	444,000	$8,965
April	312,000	$6,836
May	144,000	$4,126
June	565,000	$10,916
July	339,000	$7,271

Do not enter dollar signs or commas in the input boxes.

a) Calculate the variable rate for the equipment maintenance cost.
Round your answer to 5 decimal places.

Variable Cost per Unit: $Answer

b) Calculate the fixed portion of the equipment maintenance cost.
Round your answer to the nearest whole number.

Fixed Cost: $Answer

c) Assume that 420,000 novels is the budgeted production level for July. Using the results of the high-low method in parts a) and b), what is the expected total equipment maintenance cost for July?
Round your answer to 2 decimal places.

Expected total equipment maintenance cost for July: $Answer

Answer 1

		Number of Novels	Maintenance Costs
	High LEVEL	565,000	10,916
	Low Level	144,000	4,126
	Change	421000	6790
	Change per unit (Variable cost) =Change in Maintenance Costs/ Change in Number of Novels
	Change in Maintenance Costs	6790
	Change in Number of Novels	421000
a)	Variable cost per unit	0.01613
	Fixed Cost calculation
	Maintenance Costs at High LEVEL	10,916
	Less : Variable cost	(9,113)
b)	Fixed cost	1,803
c)	Cost for 420,000 novels
	Variabe cost	6774.60
	Fixed cost	1,803
	Total cost	8577.15