Answer:
The correct answer is B.
Explanation:
Giving the following information:
Month Number of snow cones Total operating costs
January 6,400 $5,980
February 7,000 $6,400
March 5,000 $5,000
April 6,900 $6,330
May 9,000 $7,000
June 7,250 $6,575
To calculate the fixed costs using the high-low method, first, we need to calculate the unitary variable cost:
Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)
Variable cost per unit= (7,000 - 5,000) / (9,000 - 5,000)= $0.5 per unit
Fixed costs= Highest activity cost - (Variable cost per unit * HAU)
Fixed costs= 7,000 - (0.5*9,000)= 2,500
Fixed costs= LAC - (Variable cost per unit* LAU)
Fixed costs= 5,000 - (0.5*5,000)= 2,500
