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Question :
Horton Manufacturing Inc. produces blinds and other window treatments for residential homes and offices. The owner is concerned about the maintenance costs for the production machinery because maintenance costs for the previous fiscal year were higher than he expected. The owner has asked you to assist in estimating future maintenance costs to better predict the firm's profitability.
Together, you have determined that the best cost driver for maintenance costs is machine hours. The data from the previous fiscal year for maintenance costs and machine hours follow:
Month
Maintenance Costs
Machine Hours
1
$2,650
1,624
2
2,695
1,723
3
2,745
1,739
4
2,848
1,793
5
2,881
1,923
6
3,032
2,037
7
2,891
1,934
8
2,931
1,956
9
2,805
1,837
10
2,593
1,528
11
2,613
1,680
12
2,916
1,545
Required:
Use the high-low method to estimate the fixed and variable portions for maintenance costs.
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