Answer:
Option (c) is correct.
Explanation:
Given that,
Highest level of activity = 3,700
Total cost at highest level of activity = $82,400
Lowest level of activity = 1,200
Total cost at lowest level of activity = $65,000
Here, we are using high-low method of cost estimation,
Variable cost per unit:
= (Total cost at highest level of activity - Total cost at lowest level of activity) ÷ (Highest level of activity - Lowest level of activity)
= ($82,400 - $65,000) ÷ (3,700 - 1,200)
= $17,400 ÷ 2,500
= $6.96
Fixed Costs:
= Total cost at highest level of activity - (Variable cost per unit × Highest level of activity)
= $82,400 - ($6.96 × 3,700)
= $82,400 - $25,752
= $56,648
