Question

9. Below is information about the units produced and mosts for Snow Enterprises for the past six mons. Month Number of units produced Total manufacturing Contes January 7.940 $5.900 February 7,500 $5,460 March 6,400 S5.000 April 6,600 $5,500 May 4,740 $5,100 June 7,800 $5,840 Using the high-low method, what is the monthly fixed manufacturing cost? A. $ 800 B. $11,000 C. $ 3,915

Answer 1

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

= ($5,900 - $5,100) / (7,940 - 4,740)

= $800 / 3,200

= $0.25 per unit

Variable cost = $0.25 * 7,940

= $1,985

Fixed cost = Total cost - Variable cost

= $5,900 - $1,985

= $3,915