Denapasa Manufacturing leases a vacuum cleaning system for a basic monthly fee plus an additional cost per hour used above a given minimum for each month. Given below is the information for the most recent six-month period on the number of machine hours of use and the total cost under this lease.

a. You are to provide information for planning on the variable and fixed cost elements in this lease.
Use the high-low method to determine the variable cost per machine hour for months 7 and 8.
b. Use the high-low method to compute the fixed and variable costs for months 7 and 8.

PERIOD 2 3 700 750 Demand 550 Capacity 500 Regular 500 500 Overtime 50 50 50 Subcontract 120 120 100 Beginning inventory 100 Costs $ 60 per unit S 80 per unit $ 90 per unit Regular time Overtime Subcontract S 1 per unit per month S 3 per unit per month Inventory carrying cost Back-order cost