Runaround Corporation sells running shoes and during January they ran production machines for 23,000 hours total and incurred $ 10,500 in maintenance costs. During July they ran production machines for 14,000 hours total and incurred $ 8,600 in maintenance costs. Based on this data, what is the variable maintenance cost per machine hour?

The answer is: The variable maintenance cost is $0.21 per machine hour

Explanation:

To find the variable maintenance cost per machine hour we must divide the total amount spent in maintenance costs by the total amount of production hours.

Since both production hours and maintenance cost vary so much, we must high-low method:

variable maintenance cost = (highest maintenance cost - lowest maintenance cost) / (highest machine hours - lowest machine hours) =

= ($10,500 - $8,600) / (23,000 - 14,000) = $0.21 per machine hour