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(1)You are preparing a budget for the month of January and are trying to estimate maintenance cost for the month. The maintenance cost is an overhead cost that is categorized as being mixed – that is it has both a fixed and a variable component. To arrive at the budgeted figure for January you will use the HI-Lo method to first estimate the variable component of maintenance cost per hour of operation, and then the fixed monthly maintenance cost. You can then use these values to arrive at maintenance cost for the month once you know the level of operation (in hours) for January. Using the HI-LO method and the data given below for the prior five months what is your estimated of the fixed monthly maintenance cost
Hours of operations Monthly maintenance cost
7100 2,800,000
3100 1,400,000
5000 1,900,000
6000 2,100,000
3500 1,600,000
What is the fixed monthly maintenance cost _____________
1 answer
1 answer