Ace Industries observed the following utility costs over the period from April to September. Ace believes Machine hours to be the primary cost driver for utility costs and that utility costs area mixed cost.

EXERCISE 2: HIGH/LOW METHOD Ace Industries observed the following utility costs over the period from April to September. Ace believes Machine hours to be the primary cost driver for utility costs and that utility costs area mixed cost. Machine Hours Utility Costs April 15,000 $1,950 May 17,000 $2,080 June 18,000 $2,150 14,000 July $1,900 August 20,000 $2,200 September 19,000 $2,170 Page 1 of3 From the observed values, select the highest and lowest points for Machine Hours and list the related Utility Costs. Then, calculate the High/Low difference: Machine Hours Utility Costs High (Aug) Low (July) 20,000 $2,200 $1,900 14,000 Difference hrs Next, determine the "Variable Cost per Unit" using the following formula: Difference in Total Cost Difference in Machine Hrs Variable Cost per Unit = Variable Cost per Unit per hour hours Next, use the calculated Variable Cost per Unit and the formula below to determine the Fixed portion of Utility Costs. TOTAL COSTS VARIABLE COSTSFIXED COSTS HINT: You can choose either the high or low point as a starting point. If you get stuck, please refer to the examples in the text. Variable Costs+ Fixed Costs Fixed Costs - Note: The estimated Fixed Costs calculated above would remain the same (fixed) at any level. So, subtract the Fixed Costs above from any month's total to determine that month's estimated Variable Costs