Denapasa Manufacturing Leases a Vacuum Cleaning System for a Basic

Essay

Denapasa Manufacturing leases a vacuum cleaning system for a basic monthly fee plus an additional cost per hour used above a given minimum for each month.Given below is the information for the most recent six-month period on the number of machine hours of use and the total cost under this lease.
$$\begin{array} { l r r } \text { Month } & \text { Machine Hours } & \text { Total Cost } \\7 & 6,300 & \$ 58,200 \\8 & 4,400 & 49,935 \\9 & 4,700 & 52,390 \\10 & 5,200 & 54,440 \\11 & 5,600 & 56,620 \\12 & 5,000 & 53,800 \\\end{array}$$ You are to provide information for planning on the variable and fixed cost elements in this lease.Use the high-low method to (a)determine the variable cost per machine hour and (b)compute the fixed and variable costs for months 7 and 8.