Exercise 29 Part Level Submission Stratton Inc has collected

Exercise 2-9 (Part Level Submission) Stratton, Inc., has collected the following information on its cost of electricity: January February March April May June July August September October November December Machine Hours 510 540 360 450 660 690 340 520 240 750 840 600 Total Electricity Costs $240 $300 $205 $215 $290 $300 $180 $260 $120 $340 $360 $320 (a) Using the high-low method, compute the variable cost of electricity per machine hour. (Round unit cost to 2 decimal places, e.g. 52.75.) Variable cost $ Click if you would like to Show Work for this questio Open Show Work per machine hour

Solution

Answer

Month

Machine Hours

Electricity Cost TOTAL

January

510

240

February

540

300

March

360

205

April

450

215

May

660

290

June

690

300

July

340

180

August

520

260

September

240

120

October

750

340

November

840

360

December

600

320

A=Total cost at highest level (-) Total cost at lowest level

B=Total activity at highest level (-) Total activity at lowest level.

Hence, A = $360 - $120 = $240
B= 840 machine hours – 240 machine hours = 600 machine hours.

Variable cost per unit using High Low Method = A / B = 240/600 = $0.4 per machine hour.

Month	Machine Hours	Electricity Cost TOTAL
January	510	240
February	540	300
March	360	205
April	450	215
May	660	290
June	690	300
July	340	180
August	520	260
September	240	120
October	750	340
November	840	360
December	600	320