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musickatia [10]
3 years ago
6

Ziegler Inc. has decided to use the high-low method to estimate the total cost and the fixed and variable cost components of the

total cost. The data for various levels of production are as follows:
Units Produced Total Costs
80,000 $25,100,000
92,000 27,206,000
120,000 32,120,000

a. Determine the variable cost per unit and the total fixed cost.
b. Based on part (a), estimate the total cost for 115,000 units of production.
Business
2 answers:
aev [14]3 years ago
8 0

Answer:

The correct answer for option (a) is $175.5/unit and $11,060,000 and for option (b) is $31,242,500.

Explanation:

According to the scenario, the computation of following given data are as follows:

(a). Variable cost can be calculated by using following formula:

Variable cost = [Total cost at highest level -Total cost at lowest level] ÷ (Highest level units - Lowest level units)

By putting the value we get,

Variable cost = ( $32,120000 - $25,100,000) ÷ (120,000 - 80,000)

=$175.5/unit

Fixed cost can be calculate by using following formula:

Fixed cost = Total cost at highest level - ( Variable cost × Highest level units )

By putting the value we get,

Fixed cost = $32,120,000 - ($175.5 × 120,000)

= $11,060,000

(b). Total cost can be calculated by using following formula:

Total cost = Fixed cost + ( Variable cost × Units of production )

By putting the value we get,

Total cost = $11,060,000 + ($175.5 × 115,000)

= $31,242,500.

telo118 [61]3 years ago
5 0

Answer:

a. $175.50 and $11,060,000

b. $31,242,500

Explanation:

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

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

= ($32,120,000- $25,100,000) ÷ (120,000 units - 80,000 units)

= $7,020,000 ÷ 40,000 units

= $175.50

Now the fixed cost equal to

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

= $32,120,000 - (120,000 units × $175.50)

= $32,120,000 - $21,060,000

= $11,060,000

Now the estimated total cost is would be

= Fixed cost + expected units of production × variable cost per unit

= $11,060,000 + 115,000 units × $175.50

= $11,060,000 + $20,182,500

= $31,242,500

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If a company buys back $100 worth of stock, this increases the cash flow to the stockholders by exactly $100.

This is further explained below.

<h3>What are stockholders ?</h3>

Generally, An person or a legal organization that is registered by a company as the legal owner of shares of the share capital of a public or private business is referred to as a shareholder of that corporation.\

In conclusion, When a corporation repurchases $100 worth of its own stock, the result is an increase in cash flow of precisely $100 to the firm's investors.

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2 years ago
You run a small Italian restaurant that does not yet serve pizza. In fact, your restaurant serves mainly pasta dishes and very l
pishuonlain [190]

Answer:

Q= 5714 pizzas

Explanation:

Giving the following information:

Your research shows that:

Pizza oven= $10,000.

Making the pizza= $5.00 per pizza.

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Q=(10000-0)/(6.75 - 5)

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6 0
3 years ago
Epley Industries stock has a beta of 1.25. The company just paid a dividend of $.40, and the dividends are expected to grow at 5
Volgvan

Answer:

A. 5.56%

B. 13.55%

Explanation:

In this question, we are asked to calculate the equity cost using the DCF method and the SML method

A. DCF approach

cost of equity =[ D0(1+growth )/ current price] +growth

= [.40 (1+.05) / 70 ] + .05

= [ .42 / 75] + .05

= .0056 +.05

= 0.0556 same as 5.56%

B)SML approach

Cost of equity = Rf +Beta (Rm-Rf)

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6 0
2 years ago
as the number of units manufactured increased from 100 to 200, manufacturing cost (total) increased from $350 to $650. assume th
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Consequently, the linear equation y=3x+50 connecting the total cost to the quantity produced.

<h3>What are Manufacturing Costs?</h3>

The manufacturing cost is the sum of all expenses incurred in the production of a good. The three categories of cost of manufacturing are direct costs of material, direct labor, & manufacturing overhead. It affects the overall cost of delivery. The costs directly associated with creating the product are known as manufacturing costs. The per-item cost of doing business must be calculated taking into account both production costs and manufacturing costs.

<h3>Why is manufacturing cost important?</h3>

Costs of production have a significant impact on the efficient design and production of a product. The added value model states that a profit can only be made when the cost of production is less than the value added. Therefore, a product's success depends on knowing how much it will cost to design and manufacture.

<h3>Briefing:</h3>

A linear equation is of the form

y = mx+b

where b is the value at x=0 and m is the slope (rate of change of y with respect to x).

With the information provided, the price rose by $650-$350=$300 when the quantity produced rose by 200-100=100. Therefore, 300/100=3 represents the rate of change of cost (y) in relation to x (number of units).

So the equation is of the form

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To calculate b, choose one of the two available data points.

When 100 units were produced, the total cost was $350:

350 = 3(100)+b

350 = 300+b

b = 50

The equation y=3x+50, which connects the total cost to the quantity produced, provides the right answer.

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