Answer:
Total cost= $5,425
Step-by-step explanation:
Giving the following information:
Month Machine _Hours Amount
January 200 $2,800
February 350 3,000
March 450 4,000
April 500 5,000
May 600 5,200
June 580 5,800
First, we need to calculate the fixed and variable costs. To do it, we will use the high-low method:
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (5,800 - 2,800) / (600 - 200)
Variable cost per unit= $7.5 per hour
Fixed costs= Highest activity cost - (Variable cost per unit * HAU)
Fixed costs= 5,800 - (7.5*600)
Fixed costs= $1,300
Fixed costs= LAC - (Variable cost per unit* LAU)
Fixed costs= 2,800 - (7.5*200)
Fixed costs= $1,300
Now, we can determine the total cost for 550 hours:
Total cost= 1,300 + 7.5*550
Total cost= $5,425
