Question

The manufacturing costs of Mocha Industries for three months of the year are as follows: Total Cost Production April $63,100 1,100 units May 80,920 1,800 June 100,900 2,600 a. Using the high-low method, determine the variable cost per unit. Round your answer to two decimal places. $ per unit b. Using the high-low method, determine the total fixed costs. $

Answer 1

Answer:

The variable cost per unit is $25.20

Total Fixed Cost is $35380

Explanation:

a.

The high-low method is used to separate mixed cost and give the variable component per unit in the mixed cost.

We take the highest and lowest cost and related activity level.

The Variable cost per unit = (100900 - 63100) / (2600 - 1100)

VC per unit = $25.20

b.

The total fixed cost is,

Total Cost at 1100 units = 63100

Variable cost at 1100 units = 25.20 * 1100 = 27720

Total fixed cost = 63100 - 27720 = $35380