Answer:
A. Variable cost per unit = $175.50
Fixed costs = $11,060,000
Explanation:
Requirement A:
We know, Variable cost per unit under High low method = (Highest activity cost - Lowest activity cost)/(Highest units produced - Lowest units produced)
From the question,
Highest activity cost = $32,120,000
Lowest activity cost = $25,100,000
Highest units produced = 120,000
Lowest units produced = 80,000
Therefore, Variable cost per unit = $(32,120,000 - 25,100,000)/(120,000 - 80,000)
Variable cost per unit = $175.50
To determine fixed costs, you can either the highest activity costs and units or lowest activity costs and units. The answer will be same. (I have shown the answers by an excel sheet). Here, I use the highest activity costs and units
Fixed costs = Highest activity costs - (Variable costs per unit x highest units produced)
Fixed costs = $32,120,000 - ($175.50*120,000 units)
Fixed costs = $11,060,000
Requirement B:
If a company wants to determine the total costs, since it has the variable cost and fixed costs, it can find the costs easily.
Now, if Ziegler Inc. produces 115,000 units,
the total costs will be as follows:
Total costs = Fixed costs + (Number of units produced x variable costs)
From requirement A,
Variable cost per unit = $175.50
Fixed costs = $11,060,000
Total costs = $11,060,000 + (115,000 units x $175.50)
Total costs = $31,242,500
Therefore, the company's total costs will be $31,242,500 if the company wants to produce 115,000 units.
I have attached excel sheet image and excel sheet.
