### High-Low Method to Determine Variable Utilities Cost per Machine HourGiven the following cost and activity observations for Bounty Company's utilities, use the high-low method to determine Bounty's variable utilities cost per machine hour. Round your answer to the nearest cent.| | Cost | Machine Hours ||---|------|---------------|| March | $3,142 | 15,489 || April | $2,691 | 10,041 || May | $2,810 | 11,509 || June | $3,881 | 18,009 |a. $0.15 b. $1.05 c. $1.64 d. $1.01 **Explanation of the High-Low Method:**The high-low method is used to estimate the variable and fixed cost components of a cost. It involves the following steps:1. Identify the highest and lowest activity levels and their corresponding total costs.2. Calculate the variable cost per unit of activity.3. Determine the total fixed cost.Here's how the calculations are done based on the provided data:1. **Identify Highest and Lowest Activity Levels:** - Highest: June (18,009 machine hours, $3,881) - Lowest: April (10,041 machine hours, $2,691)2. **Calculate the Variable Cost per Machine Hour:** - Variable cost per machine hour = (Cost at highest activity level - Cost at lowest activity level) / (Highest activity level - Lowest activity level) - Variable cost per machine hour = ($3,881 - $2,691) / (18,009 - 10,041) - Variable cost per machine hour = $1,190 / 7,968 - Variable cost per machine hour = $0.15 (rounded to the nearest cent)3. **Determine the Total Fixed Cost:** - Total fixed cost can be calculated using either the highest or lowest activity level, but this step is not required to answer the given question.Thus, the correct answer is:a. $0.15

Variable cost: These are those cost which changes with the changing level of activity i.e. higher…

Given the following cost and activity observations for Bounty Company's utilities, use the high-low method to determine Bounty's variable utilities cost per machine hour. Round your answer to the nearest cent. Cost Machine Hours March $3,142 15,489 April 2,691 10,041 May 2,810 11,509 June 3,881 18,009 Oa. $0.15 Ob. $1.05 Oc. $1.64 Od. $1.01

Given the following cost and activity observations for Bounty Company's utilities, use the high-low method to determine Bounty's variable utilities cost per machine hour. Round your answer to the nearest cent. Cost Machine Hours March $3,142 15,489 April 2,691 10,041 May 2,810 11,509 June 3,881 18,009 Oa. $0.15 Ob. $1.05 Oc. $1.64 Od. $1.01

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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