Question

During a year, Mark’s monthly sales compensation ranged between $20,500 and $27,900 per month and units sold ranged between 1,100 and 1,900 units for those same months. Required: Use the high–low method to determine Mark’s monthly salary and commission rate per unit sold and then calculate the total number of units sold in a year when Mark’s total compensation amounted to $290,400. (Round your "Commission rate" to 2 decimal places.)

Answer 1

Answer:

Results are below.

Explanation:

To calculate the unitary variable commission and fixed commission under the high-low method, we need to use the following formulas:

Variable commission= (Highest activity cost - Lowest activity cost)/ (Highest activity units - Lowest activity units)

Variable commission=  (27,900 - 20,500) / (1,900 - 1,100)

Variable commission=  $9.25

fixed commission= Highest activity cost - (Variable cost per unit * HAU)

fixed commission= 27,900 - (9.25*1,900)

fixed commission= $10,325

fixed commission= LAC - (Variable cost per unit* LAU)

fixed commission= 20,500 - (9.25*1,100)

fixed commission= $10,325

Now, the number of units sold for compensation of 290,400:

Total compensation= fixed commission + unitary variable commission*units sold

290,400 = 10,325 + 9.25*units sold

280,075= 9.25units sold

30,278 = units sold