Electrical costs at one of Finfrock Corporation's factories are listed below: Management believes that electrical cost is a mixed cost that depends on machine-hours.Use the high-low method to estimate the variable and fixed components of this cost.Compute the variable component first, rounding off to the nearest whole cent.Then compute the fixed component, rounding off to the nearest whole dollar.Those estimates are closest to:

A) $7.96 per machine-hour; $11,517 per month
B) $11.13 per machine-hour; $40,510 per month
C) $9.61 per machine-hour; $5,533 per month
D) $0.13 per machine-hour; $40,246 per month

Question

Electrical costs at one of Finfrock Corporation's factories are listed below:

Management believes that electrical cost is a mixed cost that depends on machine-hours.Use the high-low method to estimate the variable and fixed components of this cost.Compute the variable component first, rounding off to the nearest whole cent.Then compute the fixed component, rounding off to the nearest whole dollar.Those estimates are closest to:

A) $7.96 per machine-hour; $11,517 per month
B) $11.13 per machine-hour; $40,510 per month
C) $9.61 per machine-hour; $5,533 per month
D) $0.13 per machine-hour; $40,246 per month

Yolanda Horner · Accepted Answer

Final Answer : A, Explanation :    Variable cost per unit = Change in cost ÷ Change in activity= $438 ÷ 55 machine-hours= $7.96 per machine-hourFixed cost = Total cost - Variable cost element= $40,706 - ($7.96 per machine-hour × 3,667 machine-hours)= $40,706 - $29,189= $11,517

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