QS 21-3 Cost behavior estimation-high-low method LO P1 The following information is available for a company’s maintenance cost over the last seven months.

QS 21-3 Cost behavior estimation-high-low method LO P1

The following information is available for a company’s maintenance cost over the last seven months.

Month	Maintenance Hours			Maintenance Cost
June		9		$	5,450
July		18			6,900
August		12			5,100
September		15			6,000
October		21			6,900
November		24			8,100
December		6			3,600

  

Using the high-low method, estimate both the fixed and variable components of its maintenance cost.

Explanation:

	$8,100 – $3,600
Variable costs =		= $250 per maintenance hour
	24 – 6

Using the low point, $3,600 = ($250/maint. hr. × 6 maint. hrs.) + fixed cost.

Therefore, fixed cost = $2,100