Question
Lexington Pharmaceuticals, Inc. was incorporated in the province of British Columbia on October 28, 2011. After gathering manufacturing-related costs over a period of several years,
Lexington Pharmaceuticals, Inc. was incorporated in the province of British Columbia on October 28, 2011. After gathering manufacturing-related costs over a period of several years, the company determined that machine hours were the best predictor of the companys maintenance costs. Allison Forsythe, the companys Chief Financial Officer, is studying the following report relating to the companys maintenance costs and machine hours usage for the twelve months of the preceding year:
Month | Machine Hours | Total Cost |
January | 4,500 | $34,645 |
February | 5,400 | $40,612 |
March | 6,400 | $47,242 |
April | 5,200 | $39,286 |
May | 4,300 | $33,319 |
June | 4,400 | $33,982 |
July | 6,800 | $49,894 |
August | 4,200 | $32,656 |
September | 7,600 | $55,198 |
October | 6,200 | $45,916 |
November | 5,900 | $43,927 |
December | 6,300 | $46,579 |
Required: Please answer the following questions using the high-low method:
1. What is the variable maintenance cost per machine hour? 5 marks
2. What is the fixed cost of maintenance each month? 5 marks
3. What is the mixed cost formula for the companys maintenance cost? 5 marks
4. If Lexington uses 4,800 machine hours in a month, what will its total maintenance cost be for that month? 5 marks
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started