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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 Summary

The expert determines cost behaviors.

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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

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