Asked by Kattelin Crocker on May 11, 2024
Verified
Using the high-low method of analysis, the estimated variable lubrication cost per machine hour is closest to:
A) $1.50
B) $1.25
C) $0.67
D) $1.40
High-low Method
A technique used in cost accounting to determine the variable and fixed components of a cost by analyzing the highest and lowest levels of activity.
Variable Cost
Expenses that fluctuate in direct proportion to the amount of production or sales, including items like labor and materials.
Machine Hour
A measure of production time, where costs are attributed based on the number of hours a machine is operated.
- Compute the variable expenditure per each unit or activity.
- Become proficient in and apply the high-low method for analyzing the nature of costs.
Verified Answer
TG
Tyron GreavesMay 12, 2024
Final Answer :
A
Explanation :
Variable cost = Change in cost ÷ Change in activity = $240 ÷ 160 machine hours = $1.50 per machine hour
Learning Objectives
- Compute the variable expenditure per each unit or activity.
- Become proficient in and apply the high-low method for analyzing the nature of costs.