Question

In applying the high-low method, what is the total fixed cost? Month Miles (units) Total Cost (dollars) January 80,000 $ 96,000 February 50,000 80,000 March 70,000 94.000 April 90,000 130,000 O $36,000 $17,500 $14,000 $50,000

Answer 1

Ans:

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

Variable cost per unit= ($130,000 - $80,000) / (90,000 - 50,000)

= ($50,000) / 40,000

= $1.25

Variable cost per unit = $1.25

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

= $130,000 - ($1.25 * 90,000)

= $130,000 - $112,500

= $17,500

Fixed costs = $17,500

Option : B​​​​​

Fixed costs

$17,500

If any doubts or queries please comment and clarify I'll explain ASAP.