Denapasa Manufacturing leases a vacuum cleaning system for a basic monthly fee plus an additional cost per

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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.
PERIOD 2 3 700 750 Demand 550 Capacity 500 Regular 500 500 Overtime 50 50 50 Subcontract 120 120 100 Beginning inventory

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.

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Financial and Managerial Accounting the basis for business decisions

ISBN: 978-0078111044

16th edition

Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello

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