Question

The manufacturing cost of Calico Industries for three months of the year are provided below:Total Cost Production (units)April $120,000 280,000May 74,000 165,000June 90,900 230,000Using the high-low method, the variable cost per unit and the total fixed costs area. $0.40 per unit and $8,000b. $4.00 per unit and $800c. $0.78 per unit and $4,000d. $7.80 per unit and $4,000

Answer 1

Answer:

a. $0.40 per unit and $8,000

Explanation:

The computation of the fixed cost and the variable cost per hour by using high low method is shown below:

Variable cost per hour = (High total cost - low total cost) ÷ (High production  - low production)

= ($120,000 - $74,000) ÷ (280,000 - 165,000)

= $46,000 ÷ 115,000

= $0.40 per unit

Now the fixed cost equal to

= High total cost - (High production × Variable cost per unit)

= $120,000 - (280,000 × $0.40)

= $120,000 - $112,000

= $8,000