Question

Question Mode Fill in the Blank Question Fill in the blank question. The ABC Company had its highest level of production in May when they produced 4,000 units at a total cost of $110,000 and its lowest level of production in November when they produced 2,500 units at a total cost of $87,500. Using the high-low method, the estimated fixed costs are $ .

Answer 1

Answer:

Results are below.

Explanation:

To calculate the fixed cost under the high-low method, we need to use the following formulas:

Variable cost per unit= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)

Variable cost per unit= (110,000 - 87,500) / (4,000 - 2,500)

Variable cost per unit= $15

Fixed costs= Highest activity cost - (Variable cost per unit * HAU)

Fixed costs= 110,000 - (15*4,000)

Fixed costs= $50,000

Fixed costs= LAC - (Variable cost per unit* LAU)

Fixed costs= 87,500 - (2,500*15)

Fixed costs= $50,000