The total maintenance cost for a month in which production is expected to be 45,000 units is; TMC = $80,000
The computation of the fixed cost and the variable cost per hour by using high low method is shown as follows;
Variable cost per hour = (High Machine maintenance costs - low Machine maintenance costs) ÷ (High activity level - low activity level)
Plugging in the relevant values gives;
Variable cost per hour = ($104,000 - $40,000) ÷ (60,000 units - 20,000 units)
Variable cost per hour = $1.6
The variable cost = High activity level × per unit variable cost
Variable cost = 60,000 units × 1.6
Variable Cost = $96,000
Fixed cost = Total cost - variable cost
Fixed Cost = $104,000 - $96,000
Fixed Cost = $8,000
For 45,000 units, total maintenance cost is;
Total Maintenance Cost = Number of units × per unit variable cost + Fixed cost
TMC = (45,000 units × $1.6) + $8,000
TMC = $80,000
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