Use the following data for the 4th quarter of 2009: month activity volume (#units) total costs...
Use the following data for the 4th quarter of 2009:
| month | activity volume (#units) |
total costs |
| Oct | 80 | $5,870 |
| Nov | 75 | $6,050 |
| Dec | 105 | $7,550 |
Required:
a) Estimate fixed costs and unit variable costs using the high-low
method. (hint: should you use the observations with the
highest/lowest activity, or highest/lowest costs?)
FC=
unit VC=
b) Based on the estimates from (a), what is the cost of producing
107 units?
Homework Answers
Answer:
| variable cost per unit | y2-y1/x2-x1 |
| (7550-6050)/(105-75) | 50 |
| y2 is the total cost at highest level of activity | |
| y1 is the total cost at lowest level of activity | |
| x2 are the number of units/labor hours etc. at highest level of activity; and | |
| x1 are the number of units/labor hours etc. at lowest level of activity | |
| fixed cost = 7550-(105*50) | 2,300 |
| b) cost of 107 units | |
| 107*50+2300 | 7,650 |
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Use the following data for the 4th quarter of 2009:
month
activity volume
(#units)
total costs...
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