Question 10 In applying the high-low method, what is the fixed cost? Month January February March...

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Question 10 In applying the high-low method, what is the fixed cost? Month January February March April Miles 70000 40000 600

Answer 1

Answer #1

As per high-low method, Variable cost per unit

=( Highest cost – Lowest cost ) / ( Highest quantity – Lowest Quantity)

= ( $100,000 - $60,000 ) / ( 80,000 – 40,000)

= $40,000 / 40,000

= $1 per mile

Now, Total cost = Fixed costs + Variable costs

= Fixed costs + Variable cost per unit x Number of units

So, at highest activity level, the cost equation will be as follows :

$100,000 = Fixed Costs + $1 x 80,000

So, Fixed costs = $100,000 - $80,000

= $20,000

So, as per above calculations, option A is the correct option

Answer 2

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