Question

Mears Production Company makes several products and sells them for an average price of $70. Mears' accountant is considering two different approaches to estimating the firm's total monthly cost function, 1) account analysis, and 2) high-low. In both cases, she used units of production as the independent variable. For the account analysis approach, she developed the cost function by analyzing each cost item in June, when production was 1,550 units. The following are the results of that analysis: Cost Item Total Cost Fixed Cost Variable Cost Direct materials $5,425 $0 $5,425 Direct labor $7,905 $0 $7,905 Factory overhead $7,615 $3,430 $4,185 $5,365 $3,040 $2,325 Selling expenses Administrative expenses $4,450 $4,450 $0 Total expenses $30,760 $10,920 $19,840 For the high-low method, she developed the cost function using the data from June above and data from August, when production was 2,300 units and total costs were $41,462. After developing the two cost functions, the accountant used them to make predictions for the month of December, when production was expected to be 2,250 units. REQUIRED [ROUND UNIT COSTS TO THE NEAREST CENT AND TOTAL COSTS TO THE NEAREST DOLLAR.] Part A (5 tries; 5 points) 1. Using account analysis, what was the accountant's estimate of total fixed costs for December? 10920 2. Using account analysis, what was the accountant's estimate of variable costs per unit for December? 41680
Can somebody tell me how to do this question? Part A and B. confused about those

Answer 1

Part A Account Analysis 1 Accountant estimate for fixed cost for December = $10920 2 Accountant estimate for variable cost per unit for December = $12.8 Variable cost per unit = Variable cost/Production units $19840/1550Units $12.8

Part B High Low Method 1 Accountant estimate for fixed cost for December = $8642.61 Variable cost per unit = Total cost at maximum level-Total cost at minimum level Total Unit at maximum level-Total unit at minimum level Units Total Cost ($) 1550 30760 2300 41462 41462-30760 2300-1550 $14.2693 Fixed cost = Total cost - Variable cost per unit*units 41462-(14.2693*2300) $8642.61

2 Accountant estimate for total variable cost for december =$32819.39 Variable cost = Total cost - fixed cost 41462-8642.61 $32819.39