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    Determine Cost Behavior

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    Richie Rich, the president of Rich's Money Company, has asked for information about the cost behavior of manufacturing support costs. Specifically, he wants to know how much support cost is fixed and how much is variable. The following data are the only records available.

    Month Machine Hours Support Costs

    February 1,700 $20,500
    March 2,800 22,250
    Apri1 1,000 19,950
    May 2,500 21,500
    June 3,500 23,950

    Determine the support cost equation using the high-low method. Use machine hours as your cost driver.

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    Solution Preview

    High-Low Method is used to isolate the fixed and variable portions of a mixed cost.
    Hours Cost
    High level: 3,500 23,950
    Low level: 1,000 19,950


    Solution Summary

    The expert determines cost behaviors.