The controller of Hernandez Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs.
Month Total Maintenance Costs Total Machine Hours
January $2,500 3,000
February 3,000 4,000
March 3,600 6,000
April 4,500 7,900
May 3,200 5,000
June 5,000 8,000
Instructions
(a) Determine the fixed and variable cost components using the high-low method.
(b) Prepare a graph showing the behavior of maintenance costs, and identify the fixed and variable cost elements. Use 2,000-hour increments and $1,000 cost increments. (either do a graph or list the costs at the various levels)