Answer (A) is correct . The high-low method is used to segregate the fixed and variable components of a mixed cost. In this problem, March had the lowest activity level and February had the highest. February $1,200 for 2,600 hours March (800) for (1,600) hours Difference $?? 400 for 1,000 hours The variable portion is thus $0.40 per machine hour.
Answer (B) is incorrect because The average of the high and low months is $.48.
Answer (C) is incorrect because The March machine hours divided by the March cost is $2.00.
Answer (D) is incorrect because The increase in hours divided by the increase in cost is $2.50.
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