Question

The manufacturing costs of Ackerman Industries for the first three months of the year follow:

	Total Costs		Units Produced
January	$225,720		1,485	units
February	236,500		2,760
March	351,120		4,785

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	$
b. Total fixed cost	$

Answer 1

Total cost incurred
	units Produced	Costs incurred
High level of activity	4,785	$3,51,120
Low level of activity	1,485	$2,25,720
Change	3,300	$1,25,400
Variable maintainance cost per unit produced =$125,400 / 3,300 =$38 per unit produced
Fixed cost element =$351,120 - (4785*$38)
Fixed cost element =$351,120 - $181,830 =$169,290