Question

The manufacturing costs of Rosenthal Industries for the first three months of the year follow:

Total Costs Production
January $281,520 2,040 units
February 316,550 3,520
March 437,920 5,440
Using the high-low method, determine (a) the variable cost per unit and (b) the total fixed cost.

Answer 1

variable cost per unit = 46

fixed cost 188680

Step-by-step explanation:

The high-low method consist in compare each frame to get the variable and fixed components

5440 high

2040 low

3400 difference

437920 high

281520 low

156400 difference

variable cost =15600/3400

variable cost = 46

the reasoning is that the additional 3400 units generated that cost.

Now:

we múltiple by the units by the production and get total variable

46 * 2040 = 93840 total variable

lastly total cost - total variable = fixed

281520 - 93840 = 188680