managerial accounting question 4

Buckeye Company has provided the following data for maintenance cost:

	Prior Year	Current Year
Machine hours	17,100	20,100
Maintenance cost	$29,400	$34,200

The best estimate of the cost formula for maintenance would be: (Do not round intermediate calculations. Round your Variable cost per unit to 2 decimal places.)

	$29,400 per year plus $1.60 per machine hour
	$2,040 per year plus $.625 per machine hour
	$32,160 per year plus $.625 per machine hour
	$2,040 per year plus $1.60 per machine hour

	Machine-Hours		Maintenance Cost
High level of activity	20,100		$34,200
Low level of activity	17,100		29,400
Change	3,000		$4,800

Variable cost per unit = Change in cost ÷ Change in activity
= $4,800 ÷ 3,000 machine-hours
= $1.60 per machine-hour
Fixed cost = Total cost - Variable cost element
= $34,200 - ($1.60 per machine-hour × 20,100 machine-hours)
= $34,200 - $32,160
= $2,040