Question

Splish, Inc., produces amplifiers. Each unit sells for $1,000. Below is information on production/sales and costs for 2016: Production and Sales in Units Production Costs Selling and Admin. Costs January 104 $88,000 $23,400 February 116 97,700 25,200 March 97 82,800 22,300 April 105 89,900 23,800 May 116 96,900 25,000 June 126 103,100 26,500 July 127 105,300 26,800 August 133 107,600 27,300 September 137 111,800 27,700 October 125 103,400 26,300 November 125 101,700 26,000 December 108 90,200 24,000 Total 1,419 $1,178,400 $304,300 Average cost per unit $830.44397 $214.44679

Use the high-low method to identify the fixed and variable cost components for both production costs and selling and administrative costs. Fixed cost Variable cost Production costs $ $ Selling and administrative costs $ $

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.

Answer Production Cost Variable Cost = (High Level Cost - Low Level Cost) / (High Level units - Low Level units) = (111800-82800)/(137-97) = $ 725 Fixed Cost = Total production cost for 137 units - variable cost for 137 units = 111800 - (725*137) = $ 12475 - Selling and adminstrative cost Variable Cost = (High Level Cost - Low Level Cost)/(High Level units. Low Level units) = (27700-22300)/(137-97) = $ 135 Fixed Cost = Total selling cost for 137 units - variable cost for 137 units = 27700- ( 135*137) = $9205 Thus the final answer is Fixed Cost 12475 9205 Production Cost Selling and adminstrative cost 1 Variable Cost 725 135