Question

High-low method The manufacturing costs of Carrefour Enterprises for the first three months of the year follow: TOTAL COSTS UNITS PRODUCED JUNE $300,000 2,700 JULY $440,000 5,500 AUGUST $325,000 3,500 Using the high-low method, determine (a) the variable cost per unit and (b) the total fixed cost.

Answer 1

Answer and Explanation:

The computation of the variable cost per unit and the total fixed cost is shown below;

a. The variable cost per unit is

= (Highest total cost - lowest total cost) ÷ (Highest units produced - lowest units produced)

= ($440,000 - $300,000) ÷ (5,500 - 2,700)

= $140,000 ÷ 2,800

= $50

b. The total fixed cost is

= $440,000 - 5,500 × $50

= $440,000 - $275,000

= $165,000