Answer:
Instructions are listed below.
Explanation:
Giving the following information:
Month Cost Units
January $4,890; 4,100 units
February $4,024; 3,200 units
March $6,480; 5,300 units
April $8,840; 7,500 units
May $5,800; 4,800 units
June $7,336; 6,600 units
Gallup Company uses the high-low method to analyze mixed costs.
We need to use the following formula:
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (8,840 - 4,024) / (7,500 - 3,200)
Variable cost per unit= 1.12 per unit
Fixed costs= Highest activity cost - (Variable cost per unit * HAU)
Fixed costs= 8,840 - (1.12*7,500)= 440
Fixed costs= LAC - (Variable cost per unit* LAU)
Fixed costs= 4,024 - (1.12*3,200)= 440
A) Cost function:
Total cost= 1.12*x + 440
B) Units= 5,000
Total cost= 1.12*5,000 + 440= $6,040
