The Chambers Manufacturing Company recorded overhead costs of $14,182 at an activity level of 4,200 machine hours and $8,748 at 2,300 machine hours. The records also indicated that overhead of $9,730 was incurred at 2,600 machine hours. What is the variable cost per machine hour using the high-low method to estimate the cost equation?

a. $2,78

b. $2.86

c. $3.10

d. $3.38

e. some other answer

Question

Business

Chris Daugherty

27 March, 17:22

The Chambers Manufacturing Company recorded overhead costs of $14,182 at an activity level of 4,200 machine hours and $8,748 at 2,300 machine hours. The records also indicated that overhead of $9,730 was incurred at 2,600 machine hours. What is the variable cost per machine hour using the high-low method to estimate the cost equation?

a. $2,78

b. $2.86

c. $3.10

d. $3.38

e. some other answer

+1

Answers (1)

Know the Answer?

Emmett Howell · Answer 1

B) $2,86

Explanation:

Using the high-low method we will use the highest activity level and the lowest activity level to determine the variable and fixed portion of the costs.

Highest activity - Cost $ 14182 Hours - 4200

Lowest activity - Cost $ (8748) Hours - (2300)

Difference - $ 5434 1900

Now we determine the variable portion. 5434/1900 = 2,86

Thus the answer is B.