Question

Year 1+ Year 2 Total Revenue Less: Total Costs 500,000 700,000 314,000 (342,600) 357,400 7,000 48.94 51.06 Reported Income 186,000 5,000 62.80 Units Sold # Reported cost per unit Reported profit per unit 37.2 There is no inflation, el a) Use Hi/lo method to determine the Variable cost per unit and the fixed cost4 el el el

Answer 1

Answer

• All working forms part of the answer
• High Low Working

	Units Sold	Total Cost
High Level	7,000	$                342,600.00
Low Level	5,000	$                314,000.00
Difference	2,000	$                   28,600.00

• Calculation of variable cost per unit

Difference in Cost	$                                                             28,600.00
Difference in units sold	2,000
Variable cost per unit	$                                                                     14.30 = Answer

• Calculation of Fixed Cost

Working		High Level	Low Level
A	Total Cost	$              342,600.00	$                314,000.00
B	Total Units	7000	5000
C	Variable cost per unit	$                         14.30	$                           14.30
D = B x C	Total Variable cost	$              100,100.00	$                   71,500.00
E = A - D	Total Fixed Cost = Answer	$              242,500.00	$                242,500.00

• Answers

--Variable cost per unit = $ 14.30
--Fixed Cost per unit = $ 242,500