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In the Marigold, maintenance costs are a mixed cost. At the low level of activity (40 direct labor hours), maintenance costs are $300. At the high level of activity (300 direct labor hours), maintenance costs are $1650. Using the high-low method, what is the variable maintenance cost per unit and the total fixed maintenance cost

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Answer:

Results are below.

Explanation:

To calculate the variable and fixed costs, we need to use the following formulas:

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

Variable cost per unit= (1,650 - 300) / (300 - 40)

Variable cost per unit= $5.1923

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

Fixed costs= 1,650 - (5.1923*300)

Fixed costs= $92.31

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

Fixed costs= 300 - (5.1923*40)

Fixed costs= $92.31

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