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Precision Pumps and Valves Ltd. manufactures hydraulic components for mobile industrial equipment, such as excavators. The firm's production volume fluctuates from month to month, causing sharp swings in the amount of resources that must be acquired each month (e.g., materials purchased, machinery leased). Management would like to better understand the behaviour of its monthly overhead costs. Because of the machinery-intensive nature of the firm's production, the firm uses machine hours as its overhead cost driver. The monthly data for 2006 are as follows:
Month (2006)
Machine Hours
Overhead Cost
January
22,000
$ 620,000
February
10,000
400,000
March
13,000
465,000
April
28,000
685,000
May
17,000
540,000
June
24,000
640,000
July
14,000
300,000
August
20,000
600,000
September
30,000
675,000
October
12,000
440,000
November
26,000
660,000
December
18,000
570,000
Under the high-low method, variable cost per unit is:
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