To determine the unit variable cost using the high-low method, we follow these steps:
1. Identify the High and Low Points:
- High Point: This is the period with the highest machine hours.
- Low Point: This is the period with the lowest machine hours.
From the given data:
- The highest machine hours are in June with 8,280 hours.
- The lowest machine hours are in January with 3,620 hours.
Corresponding maintenance costs are:
- Cost in June: \[tex]$4,832
- Cost in January: \$[/tex]2,735
2. Calculate the Difference:
- Difference in Costs: \[tex]$4,832 - \$[/tex]2,735 = \[tex]$2,097
- Difference in Hours: 8,280 hours - 3,620 hours = 4,660 hours
3. Determine the Unit Variable Cost:
To find the unit variable cost per machine hour, use the formula:
\[
\text{Unit Variable Cost} = \frac{\text{Difference in Costs}}{\text{Difference in Hours}}
\]
Substituting the values:
\[
\text{Unit Variable Cost} = \frac{\$[/tex]2,097}{4,660 \text{ hours}}
\]
Calculating this gives:
[tex]\[
\text{Unit Variable Cost} \approx \$0.45 \text{ per machine hour}
\][/tex]
Therefore, the unit variable cost per machine hour is approximately \$0.45.
