Answer:
Total cost= $72,000
Explanation:
Giving the following information:
Bennett Company’s high and low level of activity last year was 150,000 units produced in June and 50,000 units produced in January. Machine maintenance costs were $104,000 in June and $40,000 in January.
We need to use the following formulas:
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (104,000 - 40,000) / (150,000 - 50,000)= $0.64 per unit
Fixed costs= Highest activity cost - (Variable cost per unit * HAU)
FC= 104,000 - (0.64*150,000)= 8,000
Fixed costs= LAC - (Variable cost per unit* LAU)
FC= 40,000 - (0.64*50,000)= 8,000
Now, we can calculate the cost of 100,000 units:
Total cost= o.64*100,000 + 8,000= $72,000
Answer:
The total maintenance cost at 100,000 units is $72000
Explanation:
The formula for high and low method is given as:
Variable cost=Cost at highest level-Cost at lowest level/(Highest activity-lowest activity)
Variable cost=$104000-$40000/(150000-50000)
=$0.64
Total cost= fixed cost+variable cost *volume
Fixed cost can be deduced by substituting the total cost and volume at any of the two activity levels.
$104000=Fixed cost+(0.64*150000)
$104000=Fixed cost+$96000
Fixed cost=$104000-$96000
fixed cost=$8000
Hence total maintenance cost at 100000 units is calculated thus:
Total cost=$8000+(100000*0.64)
Total cost=$72000
