Question

Frazier Manufacturing Company collected the following production data for the past month: Units Produced Total Cost 1,600 $44,000 1,300 38,000 1,500 42,000 1,100 33,000 If the high-low method is used, what is the monthly total cost equation

Answer 1

Answer:

total cost = 22 * x + 8800

Explanation:

The high low method is used to separate the components of variable and fixed cost when there is a mixed cost.

The highlow method calculates the variable cost per unit.

Variable cost per unit = 44000 - 33000 / 1600 - 1100 = $22 per unit

So, total fixed costs are equal to = 44000 - (1600*22) = $8800

We know that the total cost is the function of fixed + variable cost.

So, total cost = 22 * x + 8800

Where x is the number of units produced