Sheridan Company's high and low level of activity last year was 57000 units of product produced in May and 14000 units produced in November. Machine maintenance costs were $152800 in May and $49600 in November. Using the high-low method, determine an estimate of total maintenance cost for a month in which production is expected to be 55000 units. $148000 $144000 $136800 $146400

Question

Business

Cassidy Burch

30 June, 11:35

Sheridan Company's high and low level of activity last year was 57000 units of product produced in May and 14000 units produced in November. Machine maintenance costs were $152800 in May and $49600 in November. Using the high-low method, determine an estimate of total maintenance cost for a month in which production is expected to be 55000 units. $148000 $144000 $136800 $146400

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Valentino Fitzpatrick · Answer 1

Total costs = $148,000

Explanation:

Giving the following information:

Sheridan Company's high and low level of activity last year was 57000 units of product produced in May and 14000 units produced in November. Machine maintenance costs were $152800 in May and $49600 in November.

Variable cost per unit = (Highest activity cost - Lowest activity cost) / highest activity units - Lowest activity units)

Variable cost per unit = (152,800 - 49,600) / (57,000 - 14,000) = $2.4

Fixed costs = Highest activity cost - (Variable cost per unit * HAU)

Fixed costs = 152,800 - (2.4*57000) = 16,000

Fixed costs = LAC - (Variable cost per unit * LAU)

Fixed costs = 49,600 - (2.4*14,000) = 16,000

55,000 units:

Total costs = 55,000*2.4 + 16,000 = $148,000