Answer:
George Caloz & Freres
The High - Low method can be used to solve:
The Highest Units and cost = 8 at $25
The Lowest Units and cost = 2 at $16
The difference = 6 units at $9
a) Variable cost = $9/6 = $1.5 per unit
b) Fixed cost at Highest unit produced, is then:
8 x $1.5 + Fixed cost = $25
Fixed cost = $25 = $12 (8 x $1.5) = $13
Check:
At lowest units of production, fixed cost:
Fixed cost = $16 - $3(2x $1.5) = $13
c) If the company processes 5 units next week, the expected total etching costs will be $20.50 (5x $1.5 + $13)
Explanation:
a) Arrangement of the cost data:
Week Units Total Etching Cost
1 4 $18
2 3 $17
3 8 $25
4 6 $20
5 7 $24
6 2 $16
30 $120
b) The High - Low can be used to work out the variable and fixed elements of cost. This method extracts the differences in units and cost to determine the variable cost per unit and the fixed cost.
