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

Month Maintenance Hours Maintenance Cost

June 11 $ 5,050

July 17 6,850

August 13 5,650

September 16 6,550

October 22 8,350

November 25 9,250

December 7 3,850

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

Variable cost per unit = $300

Fixed cost = $1,750

Explanation:

Giving the following information:

Month Maintenance Hours Maintenance Cost

June 11 $ 5,050

July 17 6,850

August 13 5,650

September 16 6,550

October 22 8,350

November 25 9,250

December 7 3,850

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

VCunit = (9250 - 3850) / (25 - 7) = 300 per hour

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

Fixed costs = 9250 - (300 * 25) = 1750

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

Fixed costs = 3850 - (300*7) = 1750