Question

High-Low Method

Ziegler Inc. has decided to use the high-low method to estimate the total cost and the fixed and variable cost components of the total cost. The data for various levels of production are as follows:

Units Produced			Total Costs
80,000			$25,100,000
92,000			27,206,000
120,000			32,120,000

a. Determine the Costs that vary in total dollar amount as the level of activity changes.variable cost per unit and the total Costs that tend to remain the same in amount, regardless of variations in the level of activity.fixed cost.

Variable cost (Round to two decimal places.)	$ per unit
Total fixed cost	$

b. Based on part (a), estimate the total cost for 115,000 units of production.

Total cost for 115,000 units

$

Answer 1

	Total Costs	Units
High level	32120000	120000
Low level	25100000	80000
Difference	7020000	40000
a
Variable cost	175.50	per unit	=7020000/40000
Total fixed cost	11060000		=32120000-(120000*175.50)
b
Total cost for 115,000 units	31242500		=11060000+(115000*175.50)