Answer:
Total cost= 2,145 + (0.63462*x)
Explanation:
Giving the following information:
Month - Units Produced - Administrative Costs
January: 32,500 units $24,288
February: 37,700 units $27,720
March: 24,700 units $17,820
April: 40,300 units $30,360
May: 49,400 units $37,290
June: 42,900 units $29,040
July: 53,300 units $32,670
August: 45,500 units $30,030
September: 26,000 units $20,460
October: 48,100 units $34,320
November: 61,100 units $40,920
December: 54,600 units $36,630
To determine the equation for administrative costs using the high-low method, we need to use the following formulas:
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (40,920 - 17,820) / (61,100 - 24,700)= $0.63462 per unit
Fixed costs= Highest activity cost - (Variable cost per unit * HAU)
Fixed costs= 40,920 - (0.63462*61,100)= $2,145
Fixed costs= LAC - (Variable cost per unit* LAU)
Fixed costs= 17,820 - (0.63462*24,700)= $2,145
administrative costs formula:
Total cost= 2,145 + (0.63462*x)
