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    Estimating variable and fixed costs

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    Utility costs at one of Dwayne Corporation's factories are listed below:
    Machine Hours Utility Cost
    February 4.221 $ 39.308
    March 4.268 39.573
    April 4.234 39.392
    May 4.237 39.394
    June 4.299 39.787
    July 4.318 39.881
    August 4.305 39.798
    September 4.308 39.831
    October 4,226 39,315

    Management believes that utility 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. Please show all computations.

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    Solution Preview

    In the high low method we take the highest and the lowest values to calculate the fixed and variable cost
    Variable cost = ...

    Solution Summary

    The solution estimates variable and fixed costs.