Song, Inc, Uses the High-Low Method to Analyze Cost Behavior

Song, Inc., uses the high-low method to analyze cost behavior. The company observed that at 22,000 machine hours of activity, total maintenance costs averaged $33.40 per hour. When activity jumped to 25,000 machine hours, which was still within the relevant range, the average total cost per machine hour was $30.40.
On the basis of this information, what were total maintenance costs when the company experienced 23,000 machine hours?

A) $193,200.
B) $550,000.
C) $734,800.
D) $743,200.
E) $760,000.

Correct Answer:

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