(LO 1, 2) The controller of Teton Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs.

Question

Month	Total Maintenance Costs	Total Machine Hours
January	$2,900	300
February	3,000	400
March	3,600	600
April	4,300	790
May	3,200	500
June	4,500	800

Instructions
a. Determine the fixed-cost and variable-cost components using the high-low method.
b. Prepare a graph showing the behavior of maintenance costs, and identify the fixed-cost and variable-cost elements. Use 200 unit increments and $1,000 cost increments.

Determine fixed and variable costs using the high-low method and prepare graph.

Accepted Answer

a. Maintenance Costs:

[latex]\frac{\$ 4,500-\$ 2,900}{800-300}=\frac{\$ 1,600}{500}=\$ 3.20 ext { variable cost per machine hour }[/latex]

	800 Machine Hours	300 Machine Hours
Total costs	$4,500	$2,900
Less: Variable costs
800 × $3.20	2,560
300 × $3.20		960
Total fixed costs	$1,940	$1,940

Thus, maintenance costs are $1,940 per month plus $3.20 per machine hour.

b.

Question 5.PE.1: (LO 1, 2) The controller of Teton Industries has collected t...

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