Given the following cost and activity observations for smithson company’s utilities, use the high-low method to calculate smithson’s fixed costs per month. do not round intermediate calculations.
cost machine hours
january $52,200 20,000
february 75,000 29,000
march 57,000 22,000
april 64,000 24,500
a. $2,530
b. $22,800
c. $1,600
d. $50,600

c. $1,600

Explanation:

Using high low method we have

Highest cost = $75,000 for 29,000 hours in the month of February.

Lowest Cost = $52,200 for 20,000 hours in the month of January.

Variable Cost per unit =

Or

$52,200 = 20,000 V + F

$75,000 = 29,000 V + F

$22,800 = 9,000 V

$2.53 = V

20,000 V = $50,600

$52,200 - $50,600 = $1,600

Fixed Cost = $1,600

lots of credit card rewards