EXERCISE 5-12 (30 MINUTES)

2. - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH05 COST BEHAIVIOR ANALYSSIS AND USE 2. - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH05 COST BEHAIVIOR ANALYSSIS AND USE
SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH05 COST BEHAIVIOR ANALYSSIS AND USE
2. High-low analysis of maintenance cost:

Machine-

Cost

Hours Maintenance

High activity level... 90,000 $153,000 Low activity level... 60,000 105,000 Change ... 30,000 $ 48,000 Variable rate: Change in cost = $48,000 =$1.60 per MH.Change in activity 30,000 MHs Total fixed cost: Total maintenance cost at the high activity level .... $153,000 Less variable cost element (90,000 MHs × $1.60 per MH) ... 144,000 Fixed cost element ... $ 9,000 Therefore, the cost formula for maintenance is: $9,000 per month plus $1.60 per machine-hour or Y = $9,000 + $1.60X.

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Solutions Manual, Chapter 5

247

Problem 5-24 (continued)