Question

eBook Show Me How Calculator Print item High-Low Method The manufacturing costs of Gregory Industries for three months of the year are provided below. Total Costs Production January $319,680 2,220 units February 432,990 4,400 March 497,280 5.920 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 Check My Work a. Divide the difference between the highest and lowest total costs by the difference between the highest and lowest production units b. Multiply the variable unit cost by the number of units for a month. Subtract this variable cost from the month's total cost to arrive at the total foxed cost. The resulting amount should be the sam Learning Objective 1

Answer 1

Variable cost per unit = (highest total cost - lowest total cost)/(highest activity units - lowest activity units)

= ($497280 - $319680)/(5920 - 2220)

= $48 per unit

to compute total fixed cost let’s take January data,

total fixed costs = $319680 - (2220 x $48)

= $213120