PART IV HIGH-LOW METHOD (14 points)

Peterson Company incurred the following high and low maintenance costs totals during 2011: $432,000 at 20,000 units of activity during March and $320,000 at 12,000 units during August.

Instructions: Answer parts (a) through (c) below, presenting carefully labeled supporting calculations in all cases.

(a) Use the high-low method to compute the variable cost per unit and the total fixed cost element of the mixed cost component.

(b) Based on the above analysis, express the total maintenance cost in formula format.

(c) Compute the total maintenance cost for May when activity is 16,000 units.