Question

Seifer Inc.'s inspection costs are listed below:

Units Produced

Inspection Costs

April

119

$

8,600

May

117

$

8,500

June

113

$

8,400

July

125

$

8,700

August

152

$

9,300

September

100

$

8,200

October

120

$

8,600

November

200

$

10,400

Management believes that inspection cost is a mixed cost that depends on the number of units produced. Using the high-low method, the estimates of the variable and fixed components of inspection cost would be closest to:

$22 per unit plus $6,000 per month

$14 per unit plus $8,000 per month

$25 per unit plus $5,400 per month

$18 per unit plus $6,800 per month

Answer 1

	Unit Produced	Inspection Cost
High level of activity (November)	200.00	$            10,400.00
Low level of activity (September)	100.00	$               8,200.00
Change	100.00	$               2,200.00

Variable cost per unit= Change in Inspection cost/Units Produced

= $2,200/100

=Variable cost per unit=$22.00

Fix,ed cost = Total cost − Variable cost element

=$8,200-(100*$22)

Fixed Cost=$6,000

So the Answer is $22 per unit plus $6,000 per month