Estimating Variable Cost Using High-Low Method

Explanation:

Data and Calculations:

Month - Machine hours - Utility cost

January - 900 - $5,450

February - 1,800 - $6,900

March - 2,400 - $8,100

April - 600 - $3,600

Highest and Lowest:

Month - Machine hours - Utility cost

March - 2,400 - $8,100

April - 600 - $3,600

Differences = 1,800 - $4,500

Estimated variable cost:

Estimated variable cost = $4,500 / 1,800 = $2.50

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