The following data pertains to activity and the cost of maintenance for two recent months: Month 1 Month 2 Production Volume 2000 units 2500 units Maintenance Cost $900 $1,100 Based on the Hi-Low Method, the best estimate of the monthly fixed cost for maintenance is:

Fixed cost = $100

Explanation:

The high low method considers the level of highest activity and lowest activity, and compares cost at each of these levels.

It is a useful way of calculating variable cost and fixed cost.

The variable cost = (High activity cost - Low activity cost) / (High activity units - Low activity units)

Variable cost = (1,100-900) / (2,500-2,000)

Variable cost = 200/500 = $0.4

Fixed cost = High activity cost - (variable cost * High activity units)

Fixed cost = 1,100 - (0.4 * 2,500)

Fixed cost = 1,100 - 1,000

Fixed cost = $100