Wilson Corporation's activity for the first six of the current year is as follows: Machine-Hours Electrical Cost January 2,000 $ 1,560 February 3,000 $ 2,200 March 2,400 $ 1,750 April 1,900 $ 1,520 May 1,800 $ 1,480 June 2,100 $ 1,600 Using the high-low method, the fixed portion of the electrical cost each month would be:

Wilson Corporation

Using the high-low method, the fixed portion of the electrical cost each month would be:

$400.

Explanation:

a) Data and Calculations:

Month        Machine-Hours      Electrical Cost

January           2,000                   $ 1,560

February         3,000                  $ 2,200

March             2,400                   $ 1,750

April                1,900                   $ 1,520

May                1,800                    $ 1,480

June              2,100                    $ 1,600

Highest activity occurred in February and the lowest activity occurred in May.  These two period's activity data are used to compute the fixed cost for each month as follows:

February         3,000                  $ 2,200

May                  1,800                   $ 1,480

Difference       1,200                   $720

Variable cost per unit = $720/1,200 = $0.60

For February, the total variable cost is $1,800 ($0.60 * 3,000)

Therefore, the fixed cost = total cost minus the variable cost

= $2,200 - $1,800

= $400

Check:

For the month of May, the total variable cost is $1,080 ($0.60 * 1,800)

Therefore, the fixed cost = $1,480 - $1,080 = $400

what

explanation: