Homework Answers
Answer:
Total Cost at Highest level of activity (y2) = $8,980
Total Cost at Lowest level of activity (y1) = $3,480
Units at Highest level of activity (x2) = 3,400 MH
Units at Lowest level of activity (x1) = 1,200 MH
As per high-low method, Variable Cost per Unit = (y2 – y1) / (x2
– x1)
Variable Cost per MH = ($8,980 - $3,480) / (3,400 – 1,200)
Variable Cost per MH = $5,500 / 2,200
Variable Cost per MH = $2.50
Total Cost = Fixed Cost + Variable Cost
Total Cost at Highest level of activity i.e. 3,400 MH =
$8,980
$8,980 = Fixed Cost + ($2.50 * 3,400)
Fixed Cost = $480
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