HighLow Method Cost Formulas The controller of the South Cha

High-Low Method, Cost Formulas The controller of the South Charleston plant of Ravinla, Inc., monitored activitles associated with materials handling costs. The high and low levels of resource usage occurred in September and March for three different resources associated with materials handling. The number of moves is the driver. The total costs of the three resources and the activity output, as measured by moves for the two different levels, are presented as follows: Resource Forklift depreciation: Number of Moves Total Cost Low 6,500 $ 1,800 High 20,000 1,800 Indirect labor: 74,250 135,000 Low 6,500 High 20,000 Fuel and oil for forklift: 4,940 15,200 Low 6,500 High 20,000

Solution

1 Forklift Depreciation: V = $0 F = $1800 Y = $1800 Indirect labor: V = $4.5 = (135000-74250)/(20000-6500) F = $45000 =135000-(20000*4.5) Y = 45000+$4.5X Fuel and oil for forklift: V = $0.76 = (15200-4940)/(20000-6500) F = $0 =15200-(20000*0.76) Y = $0.76X