Question

In: Accounting

Mattey Publishing Company (Mattey) is a publisher of novels. The monthly equipment maintenance cost for Mattey...

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

Solutions

Expert Solution

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

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