Question

Markowis Corp. has collected the following data concerning its maintenance costs for the past 6 months. Units Produced Total Cost July 18,000 $36,000 August 32,000 48,000 September 36,000 55,000 October 22,000 38,000 November 40,000 74,500 December 38,000 71,000 Compute the variable cost per unit using the high-low method. (Round variable cost per mile to 2 decimal places e.g. 1.25.) Variable cost per unit $ LINK TO TEXT Compute the fixed cost elements using the high-low method. Fixed costs $

Answer 1

Answer:

$1.75 and $4,500

Explanation:

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

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

= ($74,500 - $36,000) ÷ (40,000 units - 18,000 units )

= $38,500 ÷ 22,000 units

= $1.75 per unit

Now the fixed cost equal to

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

= $74,500  - (40,000 units × $1.75)

= $74,500 - $70,000

= $4,500

We simply applied the above formulas