Swofford Inc. has provided the following data concerning its maintenance costs:??Machine-HoursMaintenance Cost?March4,440$50,950?April4,431$50,877?May4,412$50,696?June4,460$51,113?July4,414$50,711?August4,433$50,900?September4,443$50,976?October4,415$50,730?November4,391$50,530Management believes that maintenance cost is a mixed cost that depends on machine-hours.Required:Estimate the variable cost per machine-hour and the fixed cost per month using the high-low method. Show your work!
What will be an ideal response?
| ? | ? | Machine-Hours | Maintenance Cost |
| ? | High activity level (June) | 4,460 | $51,113 |
| ? | Low activity level (November) | 4,391 | $50,530 |
| ? | Change | 69 | $583 |
Variable cost = Change in cost ÷ Change in activity
Variable cost = $583 ÷ 69 machine-hours = $8.45 per machine-hour
Fixed cost = Total cost - Variable cost
Fixed cost = $50,530 ? ($8.45 per machine-hour × 4,391 machine-hours) = $13,426
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