Bell Company has provided the following data for maintenance costs Machine Hours incurred Maintenance Costs incurred April May 12,000 16,000 24,000 26,000 Using the high-low method, the cost formula for maintenance costs would be a

Accounting Mar 02, 2021

Bell Company has provided the following data for maintenance costs
Machine Hours incurred Maintenance Costs incurred
April May 12,000 16,000 24,000 26,000
Using the high-low method, the cost formula for maintenance costs would be a. $2.00 per machine hour b. $1.625 per machine hour c. $18,000 plus $0.50 per machine hour d. $24,000 plus $0.50 per machine hour

Expert Solution

Change
		Cost	Activity
April		24,000	12,000
May		26,000	16,000
Change		2,000	4,000

VC per unit = Change in Cost/ Change in Units
	2000 / 4000 = 0.50 per unit
Total Fixed cost:
Total cost for 12,000 Hours		$24,000
Less: Variable Cost 12,000*0.50)		6000
Total Fixed cost:		$18,000

Cost formula for Maintenance cost = $18,000+$0.50x

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