In the Restin Company, maintenance costs are a mixed cost. At the low level of a
ID: 2376600 • Letter: I
Question
In the Restin Company, maintenance costs are a mixed cost. At the low level of activity (160 direct labor hours), maintenance costs are $600. At the high level of activity (400 direct labor hours), maintenance costs are $1,100. Using the high-low method, what is the variable maintenance cost per unit and the total fixed maintenance cost?
Variable Cost Per Unit Total Fixed Cost
a. $2.08 $268
b. $2.08 $500
c. $2.75 $220
d. $2.75 $400
CExplanation / Answer
In the Restin Company, maintenance costs are a mixed cost. At the low level of activity (160 direct labor hours), maintenance costs are $600. At the high level of activity (400 direct labor hours), maintenance costs are $1,100. Using the high-low method, what is the variable maintenance cost per unit and the total fixed maintenance cost?
Variable Cost Per Unit = (1100-600)/(400-160)=2.083$
total fixed cost = 1100-2.083(400)=267.7=268$
hence the answer is A
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