Question

In applying the high-low method, what is the total fixed cost? Month Miles (units) Total Cost (dollars) January 80,000 $ 96,000 February 50,000 80,000 March 70,000 94.000 April 90,000 130,000 O $36,000 $17,500 $14,000 $50,000

Answer 1

Answer

• Correct Answer = Option #2: Fixed Cost = $ 17,500
• Working/ High Low method

	Months	Units	Cost
High Level	Apr	90,000	$                130,000.00
Low Level	Feb	50,000	$                   80,000.00
Difference		40,000	$                   50,000.00
A	Difference in Cost		$                   50,000.00
B	Difference in units		40,000
C = A/B	Variable cost per unit		$                           1.250
Working		High Level	Low Level
A	Total Cost	$              130,000.00	$                   80,000.00
B	Total Units	90000	50000
C	Variable cost per unit	$                           1.25	$                             1.25
D = B x C	Total Variable cost	$              112,500.00	$                   62,500.00
E = A - D	Total Fixed Cost = Answer	$                 17,500.00	$                   17,500.00