Question

High-Low Method The manufacturing costs of Ackerman Industries for the first three months of the year follow: Total Costs Units Produced January $1,900,000 20,000 units February 2,250,000 27,000 March 2,400,000 30,000 Using the high-low method, determine (a) the variable cost per unit and (b) the total fixed cost. a. Variable cost per unit $fill in the blank 1 b. Total fixed cost $fill in the blank 2

Answer 1

Answer:

A. $50 per unit

B. $900,000

Explanation:

(a) Computation for the variable cost per unit using this formula

Variable cost per unit=(Total cost at highest level-Total cost at lowest level)/(Highest level-Lowest level)

Let plug in the formula

Variable cost per unit=(2,400,000-1,900,000)/(30,000-20,000)

Variable cost per unit=500,000/10,000

Variable cost per unit=$50 per unit

Therefore The Variable cost per unit will be $50 per unit

B. Computation to determine the Total fixed cost

Total fixed cost=2,400,0000-(50*30,000)

Total fixed cost=2,400,0000-1,500,000

Total fixed cost=$900,000

Therefore The Total fixed cost will be $900,000