Question

Werthiem Corporation sells running shoes and during January they ran production machines for 20,000 hours total and incurred $9,000 in maintenance costs. During July they ran production machines for 14,000 total and incurred $7,200 in maintenance costs. Based on this data, what is the variable maintenance cost per machine hour?

Answer 1

Answer:

$0.3 per machine hour

Explanation:

The computation of the variable maintenance cost per machine hour is shown below:

Variable cost per machine hour = (High maintenance cost - low maintenance cost) ÷ (High machine hours - low machine hours)

= ($9,000 - $7,200) ÷ (20,000 hours - 14,000 hours)

= $1,800 ÷ 6,000 hours

= $0.3 per machine hour

We assume that the high low method is applied in this question