Question

Yang Manufacturing, which uses the high-low method, makes a product called Yin. The company incurs three different cost types (A, B, and C) and has a relevant range of operation between 2,500 units and 10,000 units per month. Per-unit costs at two different activity levels for each cost type are presented below. Type A Type B 5,000 units 7,500 units Type C $4 $3 Total $17 $13 $6 The cost formula that expresses the behavior of Yang's total cost is: OY $0+ $17%. O Y = $20,000+ $13X. O Y = $40,000 + $9X. OY - $45,000 + $4x O Y= $60,000 + $5X

Answer 1

Type A is a variable cost as unit cost is same for both volumes

Type B:
	Per unit	Total cost
5000 units	9	45000
7500 units	6	45000
Type B is a fixed cost as total cost is same for both volumes

Type C:
	Per unit	Total cost
5000 units	4	20000
7500 units	3	22500
Variable cost per unit	1	=(22500-20000)/(7500-5000)
Fixed cost	15000	=20000-(5000*1)

	Variable cost per unit	Fixed cost
Type A	4
Type B		45000
Type C	1	15000
Total	5	60000
Cost formula: Y = $60,000 + $5X
Option E is correct