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High-Low method

Johnson Company has observed that at an activity level of 5,000 units the cost for maintenance is $6,500 and at 10,000 units the cost for maintenance is $9,000. Using the high-low method, the cost formula for maintenance is

$4,000 plus $.50 per unit
$3,000 plus $.60 per unit
$.90 per unit
$1.30 per unit

Solution Preview

We separate the fixed and variable costs
Variable cost = ...

Solution Summary

The solution explains how to determine the cost formula using the high low method

$2.19