Question

The manufacturing cost of Calico Industries for three months of the year are provided below: Total Cost Production (units) April $113,400 281,300 May 87,600 167,700 June 108,100 235,300 Using the high-low method, the variable cost per unit and the total fixed costs are a. $0.23 per unit and $48,701 b. $4.14 per unit and $4,870 c. $2.30 per unit and $4,870 d. $0.41 per unit and $24,351

Answer 1

Answer:

a. $0.23 per unit and $48,701

Explanation:

Highest total cost (Ch)= $113,400

Most units produced (Uh) = 281,300 units

Lowest total cost (Cl) = $87,600

Fewest units produced (Ul) = 167,700 units

According to the high-low method, the variable cost per unit is given by:

$V_c = \frac{C_h-C_l}{U_h-U_l}= \frac{113,400-87,600}{281,300-167,700}\\V_c = \ 0.23\ per\ unit$

Using the month of April (highest production), total Fixed costs are given by:

$FC = 113,400- (0.23*281,300)\\FC=\ 48,701$

Calico Industries' variable cost per unit and the total fixed costs are, respectively, $0.23 per unit and $48,701.