Question

10. Marcye Co. manufactures office furniture. During the most productive month of the year, 3,500 desks were manufactured at a total cost of $84,400. In its slowest month, the company made 1,100 desks at a cost of $46,000. Using the high-low method of cost estimation, determine variable costs per unit and total fixed costs.

Answer 1

Answer:

$16 and $28,400

Explanation:

The computation of the fixed cost and the variable cost per unit by using high low method is shown below:

Variable cost per unit = (High total cost - low total cost) ÷ (High units - low units)

= ($84,400 - $46,000) ÷ (3,500 desks - 1,100 desks)

= $38,400 ÷ 2,400 desks

= $16

Now the fixed cost equal to

= High total cost - (High units × Variable cost per units)

= $84.400 - (3,500 desks × $16))

= $84,400 - $56,000

= $28,400