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21 November, 11:22

Fulton and Sons, Inc. presently leases a copy machine under an agreement that calls for a fixed fee each month and a charge for each copy made. Fulton made 16,000 copies and paid a total of $630 in March; in May, the firm paid $600 for 14,000 copies. The company uses the high-low method to analyze costs.

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  1. 21 November, 11:36
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    Solution:

    Given,

    Fulton made 16,000 copies

    Paid a total of $630 in March

    Firm paid $600 for 14,000 copies

    The variable cost per unit is (High - Low costs) : (High - Low Units)

    = ($630 - $600) : (16,000 - 14,000) = $0.015 per copy.

    Variable costs (using the low level) = 14,000 * $0.015 = $210;

    Total costs - variable costs = fixed costs

    (or $600 - $210 = $390) Units * Variable cost per unit + Fixed costs

    = (12,000 * $0.015) + $390 = $570.00.
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