Question: Using the high-low method, the estimated variable cost per machine hour for utilities is: a) $2.50. b) $6.00. c) $3.38. d) $6.17. e) $4.22.

Answer: The estimated variable cost per machine hour for utilities using the high-low method is $2.50.

Estimating Variable Cost Using High-Low Method

05 Oct 2021

Data and Calculations:

Month - Machine hours - Utility cost

January - 900 - $5,450

February - 1,800 - $6,900

March - 2,400 - $8,100

April - 600 - $3,600

Highest and Lowest:

Month - Machine hours - Utility cost

March - 2,400 - $8,100

April - 600 - $3,600

Differences = 1,800 - $4,500

Estimated variable cost:

Estimated variable cost = $4,500 / 1,800 = $2.50