Answer:
The correct answer is D.
Explanation:
Giving the following information:
Month - Lease cost - Machine hours
April: $15,000 - 800
May: $10,000 - 600
June: $12,000 - 770
July: $16,000 - 1,000
Using the high-low method, first, we need to determine the unitary variable cost. We need to use the following formula:
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (16,000 - 10,000) / (1,000 - 600)
Variable cost per unit= $15 per unit
Now, we can calculate the fixed costs:
Fixed costs= Highest activity cost - (Variable cost per unit * HAU)
Fixed costs= 16,000- (15*1,000)
Fixed costs= $1,000
Fixed costs= LAC - (Variable cost per unit* LAU)
Fixed costs= 10,000 - (15*600)
Fixed costs= $1,000
