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High-Low Method 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 1,495 $198,720 2,650 223,450 3,795 309,120 a. Determine the variable cost per unit and the total fixed cost. Variable cost: (Round to the nearest dollar.) $fill in the blank 1 per unit Total fixed cost: $fill in the blank 2 b. Based on part (a), estimate the total cost for 1,900 units of production. Total cost for 1,900 units: $fill in the blank 3

Sagot :

Tundexi

Answer:

1. Variable cost per unit = [Total cost at highest level - Total cost at lowest level] / (Highest level of unit- Lowest level of unit)

Variable cost per unit = [$309,120 - $198,720] / [3,795 - 1,495]

Variable cost per unit = $110,400 / 2,300

Variable cost per unit = $48

Fixed costs = Total cost at highest level - [Variable cost per unit*Highest level of unit]

Fixed costs = $309,120 - [$48*3,795]

Fixed costs = $309,120 - $182,160

Fixed costs = $126,960

2. Total cost = Fixed cost + Variable cost

Total cost = $126,960 + $48*(1,900 units)

Total cost = $126,960 + $91,200

Total cost = $218,160

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