Question

Biblio Files Company is the chief competitor of Cover-to-Cover Company in the bookshelf business. Biblio Files is analyzing its manufacturing costs, and has compiled the following data for the first six months of the year. After reviewing the data, answer questions (1) through (3) that follow.
Month Number of Units Produced Total Cost
January 4,360 $65,600
February 225 $6,250
March 1,000 $15,000
April 5,475 $111,250
May 1,750 $32,500
June 3,015 $48,000
From the data previously provided, help Biblio Files Company estimate the fixed and variable portions of its total costs using the High-Low Method. Recall that Total Costs = (Variable Cost Per Unit x Units Produced) + Fixed Cost. Complete the following table.
Total Fixed Cost Variable Cost per Unit

Answer 1

Answer and Explanation:

The computation is given below:

As we know that

The Variable cost per unit is

= (Highest activity cost- Lowest activity cost) ÷ (Highest activity units- Lowest activity units)

Particulars              Total Cost Units

Highest units       111,250.00        5,475.00

Lowest units         6,250.00 225.00

Difference       105,000.00 5,250.00

Variable cost per unit                 20.00  

Now

Fixed cost= Highest activity cost- (Highest units × Variable cost per unit)

= $111,250 - (5475 × 20)

=  $1,750.00