Question

High-Low Method The manufacturing costs of Ackerman Industries for the first three months of the year follow: Total Costs Units Produced January $269,280 3,080 units February 337,200 4,860 March 418,880 7,480 Using the high-low method, determine (a) the variable cost per unit and (b) the total fixed cost. Round all answers to the nearest whole dollar. a. Variable cost per unit 34 b. Total fixed cost 164,560

Answer 1

(a)-Variable cost per unit

Change in total cost

High = $418,880

Low = $269,280

Change in total cost = $149,600

Change in units

High = 7,480 units

Low = 3,080 units

Change in units = 4,400 units

Using the High-Low method, the Variable cost per unit = Change in total cost / Change in units

= $149,600 / 4,400 units

= $34

(b)-The Total Fixed Costs

Total Cost = Total Variable costs + Total Fixed Costs

$418,880 = [7,480 units x $34] + Total Fixed Costs

$418,880 = $254,320 + Total Fixed Costs

Therefore, the Total Fixed Costs = $418,880 - $254,320

Total Fixed Costs = $164,560