In: Accounting
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
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 |