Answer:
Total cost= 0.75x + 6,000
Explanation:
Giving the following information:
Year 2:
Units= 12,000
Cost= $15,000
Year 1:
Units= 8,000
Cost= $12,000
To determine the cost formula, first, we need to calculate the unitary variable cost and fixed cost.
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (15,000 - 12,000) / (12,000 - 8,000)= $0.75 per unit
Fixed costs= Highest activity cost - (Variable cost per unit * HAU)
Fixed costs= 15,000 - (0.75*12,000)= $6,000
Fixed costs= LAC - (Variable cost per unit* LAU)
Fixed costs= 12,000 - (0.75*8,000)= $6,000
Now, the cost formula is:
Total cost= unitary variable cost + fixed cost
Total cost= 0.75x + 6,000
