Question

Ziegler Inc. has decided to use the high-low method to estimate the total cost and the fixed and variable cost components of the total cost. The data for various levels of production are as follows: Units Produced Total Costs
3,300 $168,000
1,300 108,000
2,390 149,040
a. Determine the variable cost per unit and the total fixed cost.
b. Based on part (a), estimate the total cost for 1,660 units of production.

Answer 1

Answer:

Ziegler Inc.

a) The variable cost per unit = $60

b) The total fixed cost = $30,000

c) The total cost for 1,660 units = $129,600

Explanation:

a) Production Data and Calculations:

Units            Total

Produced    Costs

3,300        $168,000

1,300           108,000

2,390          149,040

High-low method:

High 3,300        $168,000

Low  1,300           108,000

Diff.  1,000          $60,000

Variable cost = $60 ($60,000/1,000)

Fixed cost = $30,000 ($108,000 - ($60 * 1,300)

Total cost for 1,660 units:

Variable costs = $99,600 ($1,660 * $60)

Fixed cost =          30,000

Total costs =     $129,600