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 $28,166,000 104.000 114,000 29,781,000 128,000 32,042,000 This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. X Open spreadsheet a. Determine the variable cost per unit and the total fixed cost. Round your answer for variable cost to the nearest cent. Round your answer for total fixed costs to the nearest dollar Variable cost: per unit Total fixed cost b. Based on part (a), estimate the total cost for 84,000 units of production. Round your answer to the nearest dollar. Total cost for 84,000 units:

Answer 1

Requirement 1

Variable cost per employee	$                  161.50
Fixed cost	$   11,370,000.00

Requirement 2

Total cost at 84000 units = $24,936,000

Working

		Cost	No. of activities
A	High Level	$ 32,042,000.00	128000
B	Low Level	$ 28,166,000.00	104000
C=A-B	Difference	$    3,876,000.00	$            24,000.00
A	Cost difference	$    3,876,000.00
B	No. of activities difference	24000
C=A/B	Variable cost per unit	$                161.50
		High Level	Low Level
A	No. of activities	128000	104000
B	Variable cost per unit	$            161.5000	$             161.5000
C=AxB	Total Variable cost	$ 20,672,000.00	$   16,796,000.00
D	Total cost	$ 32,042,000.00	$   28,166,000.00
E=D-C	Total fixed cost	$ 11,370,000.00	$   11,370,000.00

.

No of Units	84000
Variable cost (84000 x 161.50)	$ 13,566,000.00
Fixed cost	$ 11,370,000.00
Total cost	$ 24,936,000.00