The following information is available for a company’s maintenance cost over the last seven months. |
Month | Maintenance Hours | Maintenance Cost | ||||
June | 9 | $ | 5,450 | |||
July | 18 | 6,900 | ||||
August | 12 | 5,100 | ||||
September | 15 | 6,000 | ||||
October | 21 | 6,900 | ||||
November | 24 | 8,100 | ||||
December | 6 | 3,600 | ||||
$8,100 – $3,600 | ||
Variable costs = | = $250 per maintenance hour | |
24 – 6 |
Using the low point, $3,600 = ($250/maint. hr. × 6 maint. hrs.) + fixed cost. |
Therefore, fixed cost = $2,100 |
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