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Good day.
Can you please help me with question #22 September 2016 about Maintenance Costs with 80% capacity.I didnt get how $125/hour is found.
Thanks in advance
Because maintenance is a semi-variable cost, we use the high low method (which is revision of F2 but is also revised in my free lectures on “Quantitative techniques for budgeting”.
We look at the month having the highest number of hours and the month having the lowest number of hours. Since fixed costs will be the same each month, the difference in the total cost for the 2 months must be the extra variable cost of the extra hours.
I do suggest that you watch my free lectures on high-low. The lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.
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