In applying the high-low method, what is the fixed cost? month miles total cost january 80,000 $144,000 february 50,000 120,000 march 70,000 141,000 april 90,000 195,000

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Jaycee Lee

29 March, 15:48

In applying the high-low method, what is the fixed cost? month miles total cost january 80,000 $144,000 february 50,000 120,000 march 70,000 141,000 april 90,000 195,000

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Mendez · Answer 1

The high and low levels of activity are 90,000 miles in April and 50,000 miles in February. The costs at these two levels are $195,000 and $120,000, re-spectively. The difference in costs is $75,000 ($195000-120000), and the difference in miles is 40,000 (90000-50000). Therefore, variable cost per unit is $1.875computed as follows.

75000:40000=1.875

Determine the fixed costs by subtracting the total variable costs at either the high or the low activity level from the total cost at that activity level

Variable cost=1.875*50,000=93,750

fixed cost=120,000-93,750=26,250