high-low method

the manufacturing costs of schroeder industries for the first three months of the year follow:

\begin{tabular}{lcc}
& total costs & units produced \\
\hline
january & \$171,000 & 950 units \\
february & 179,170 & 1,710 \\
march & 266,000 & 2,850
\end{tabular}

using the high-low method, determine (a) the variable cost per unit and (b) the total fixed cost.

a. variable cost per unit \$
b. total fixed cost \$

Question

high-low method

the manufacturing costs of schroeder industries for the first three months of the year follow:

\begin{tabular}{lcc}
& total costs & units produced \\
\hline
january & \$171,000 & 950 units \\
february & 179,170 & 1,710 \\
march & 266,000 & 2,850
\end{tabular}

using the high-low method, determine (a) the variable cost per unit and (b) the total fixed cost.

a. variable cost per unit \$
b. total fixed cost \$

Accepted Answer

{ "quality": "clear", "question_count": 1, "skills_matched": [ "step_cot", "blank_filling_formatter", "explain_then_answer", "quick" ], "needs_drawing": false, "concepts_used": [ "High-Low Method", "Variable Cost", "Fixed Cost" ], "new_concepts": [], "current_concepts": [ "High-Low Method", "Variable Cost", "Fixed Cost" ] } ## Identify high and low activity levels $$ \begin{aligned} &\text{High Activity (March): } 2,850 \text{ units, } \$266,000\ &\text{Low Activity (January): } 950 \text{ units, } \$171,000 \end{aligned} $$ ## Calculate variable cost per unit $$ \begin{aligned} \text{Variable Cost per Unit} &= \frac{\text{High Cost} - \text{Low Cost}}{\text{High Units} - \text{Low Units}} \ &= \frac{\$266,000 - \$171,000}{2,850 - 950} \ &= \frac{\$95,000}{1,900} \ &= \$50 \end{aligned} $$ ## Calculate total fixed cost $$ \begin{aligned} \text{Fixed Cost} &= \text{Total Cost} - (\text{Variable Cost per Unit} \times \text{Units}) \ &= \$266,000 - (\$50 \times 2,850) \ &= \$266,000 - \$142,500 \ &= \$123,500 \end{aligned} $$ Using the high-low method, determine (a) the variable cost per unit and (b) the total fixed cost. a. Variable cost per unit $ 50 b. Total fixed cost $ 123,500 { "subject": "Business", "question_type": "Fill-in-the-blank", "knowledge_point": [ "Business", "Accounting", "High-Low Method" ] }

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QUESTION IMAGE

Question

Explanation:

Identify high and low activity levels

Calculate variable cost per unit

Calculate total fixed cost

Answer: