1. Hitchcock, Inc., uses the high-low method to analyze cost behavior. The company observed that at 12,000 machine hours of activity, total maintenance costs averaged $7.00 per hour. When activity jumped to 15,000 machine hours, which was still within the relevant range, the average cost per machine hour totaled $6.40. On the basis of this information, the variable cost per machine hour was:

A. $4.00.

B. $6.40.

C. $6.70.

D. $7.00.

E. an amount other than those listed above.

Answer: A

2. Northridge, Inc., uses the high-low method to analyze cost behavior. The company observed that at 20,000 machine hours of activity, total maintenance costs averaged $10.50 per hour. When activity jumped to 24,000 machine hours, which was still within the relevant range, the average cost per machine hour totaled $9.75. On the basis of this information, the company's fixed maintenance costs were:

A. $24,000.

B. $90,000.

C. $210,00.

D. $234,000.

E. an amount other than those listed above.

Answer: B

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