Answer:
1. Variable cost is $0.061 or 6.1 cents per unit
Fixed Cost is $12,654
2. Y = $12,654 + $0.061X
3. $21,316
Explanation:
1.
Cost at 171,000 km = 171,000 x $13.5/100 = $23,085
Cost at 114,000 km = 114,000 x $17.2/100 = $19,608
High low method separates the fixed cost and variable cost using net of Highest activity level and Lowest activity level and net of their relevant costs.
According to High low method
Variable cost per unit = ( Highest activity cost - Lowest activity cost ) / ( Highest Activity - Lowest activity )
Variable cost per unit = ( $23,085 - $19,608 ) / ( 171,000 - 114,000 )
Variable cost per unit = $3,477 / 57,000
Variable cost per unit = $0.061
Fixed operating cost = Total cost - Total Variable cost = $19,608 - ( 114,000 x $0.061 ) = $12,654
2.
Y = a + bX.
Y = Total cost
a = Fixed cost = $12654
b = Variable cost per unit = $0.061 or 6.1 cents
Y = $12,654 + $0.061X
3
Total Distance travelled = X = 142,000 km
Y = $12,654 + $0.061 ( 142,000)
Y = $12,654 + $8,662
Y = $21,316
Total Cost is $21,316
