The controller of Sandhill Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs. Month Total Maintenance Costs Total Machine Hours January$2,8803,820 February3,2734,364 March3,9286,546 April4,6328,619 May3,4915,455 June4,8448,730 (a1) New attempt is in progress. Some of the new entries may impact the last attempt grading. Your answer is incorrect. Determine the variable-cost components using the high-low method. (Round answer to 2 decimal places e. g. 2.25.) Variable cost per machine hour $Type your answer here

(a) The variable-cost components using the high-low method is $0.37.

(b) The fixed-cost components using the high-low method is $1,442.97.

Explanation:

Note: This question is not complete and the data in its are merged together. The complete question with the sorted data is therefore presented before answering the question as follows:

The controller of Sandhill Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs.

Month    Total Maintenance Costs     Total Machine Hours

January                $2,880                                  3,820

February                 3,273                                  4,364

March                     3,928                                  6,546

April                       4,632                                   8,619

May                        3,491                                   5,455

June                       4,844                                  8,730

(a) Determine the variable-cost components using the high-low method. (Round answer to 2 decimal places e.g. 2.25.)

(b) Determine the fixed-cost components using the high-low method. (Round answer to 2 decimal places e.g. 2.25.)

The explanation of the answer is now given as follows:

(a) Determine the variable-cost components using the high-low method. (Round answer to 2 decimal places e.g. 2.25.)

From the data given, the highest Total Maintenance Costs and Total Machine Hours in April, while the lowest are in January. Therefore, we have:

Variable cost per hour = (Highest Total Maintenance Costs - Lowest Total Maintenance Costs) / (Highest Total Machine Hours - Lowest Total Machine Hours = ($4,632 - $2,880) / (8,619 -  3,820) = $1,752 / 4,799 = 0.365076057511982

Rounding to 2 decimal places as required, we have:

Variable cost per hour = $0.37

Therefore, the variable-cost components using the high-low method is $0.37.

(b) Determine the fixed-cost components using the high-low method. (Round answer to 2 decimal places e.g. 2.25.)

Total cost = Total Fixed Cost + Total Variable Cost (1)

Where;

Total Variable Cost = Variable cost per hour * Hours at a particular Total Maintenance Costs

Using highest levels of activity and substitute into equation (1), we have:

$4,632 = Total Fixed Cost - ($0.37 * 8,619)

Total Fixed Cost = $4,632 - ($0.37 * 8,619) = $4,632 - $3,189.03 = $1,442.97

Therefore, the fixed-cost components using the high-low method is $1,442.97.

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