In the gabbana company, maintenance costs are a mixed cost. at the low level of activity (40 direct labor hours), maintenance costs are $600. at the high level of activity (100 direct labor hours), maintenance costs are $1,100. using the high-low method, what is the variable maintenance cost per unit and the total fixed maintenance cost?
Wrigley juicy fruit
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(i) $8.33 per unit
(ii) $267
Explanation:
Under high-Low method:
[tex]Variable\ cost=\frac{Cost\ at\ high\ activity-cost\ at\ low\ activity}{Highest\ activity-Lowest\ activity}[/tex]
[tex]Variable\ cost=\frac{1,100-600}{100-40}[/tex]
[tex]Variable\ cost=\frac{500}{60}[/tex]
= $8.33
Total cost = variable cost per unit + Fixed cost
1,100 = (8.33 × 100) + Fixed cost
1,100 - 833 = Fixed cost
$267 = Fixed cost