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Portman Company's activity for the first three months of 2027 is as follows:

\begin{tabular}{|c|c|c|}
\hline
& Machine Hours & Electrical Cost \\
\hline
January & 2,100 & [tex]$\$[/tex] 4,800[tex]$ \\
\hline
February & 2,600 & $[/tex]\[tex]$ 5,800$[/tex] \\
\hline
March & 2,900 & [tex]$\$[/tex] 6,400[tex]$ \\
\hline
\end{tabular}

Using the high-low method, what is the variable cost per machine hour?

A. $[/tex]\[tex]$ 2.00$[/tex]

B. [tex]$\$[/tex] 3.00[tex]$

C. $[/tex]\[tex]$ 2.26$[/tex]

D. [tex]$\$[/tex] 1.78$



Answer :

GinnyAnswer
To find the variable cost per machine hour using the high-low method, follow these steps:

### Step 1: Identify the high and low points
1. High Point: Determine the highest and lowest machine hours from the data.
- The highest machine hours is 2,900 hours (in March).
- The lowest machine hours is 2,100 hours (in January).

2. Corresponding Costs: Identify the costs that correspond to these high and low points.
- The cost for the high point (2,900 hours) is \[tex]$6,400 (March). - The cost for the low point (2,100 hours) is \$[/tex]4,800 (January).

### Step 2: Compute the Change in Cost and Change in Machine Hours
1. Change in Cost:
[tex]\[ \Delta \text{Cost} = \$6,400 - \$4,800 = \$1,600 \][/tex]

2. Change in Machine Hours:
[tex]\[ \Delta \text{Machine Hours} = 2,900 \text{ hours} - 2,100 \text{ hours} = 800 \text{ hours} \][/tex]

### Step 3: Calculate the Variable Cost per Machine Hour
Using the high-low method, the variable cost per machine hour is calculated by dividing the change in cost by the change in machine hours:
[tex]\[ \text{Variable Cost per Machine Hour} = \frac{\Delta \text{Cost}}{\Delta \text{Machine Hours}} = \frac{\$1,600}{800 \text{ hours}} = \$2.00 \text{ per hour} \][/tex]

### Step 4: Select the Correct Option
Among the given options, the correct variable cost per machine hour is:
[tex]\[ \boxed{\$2.00} \][/tex]

So, the variable cost per machine hour by using the high-low method is \$2.00 per hour.

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