Question

During a year, Teri’s monthly sales compensation ranged between $22,000 and $30,000 per month and units sold ranged between 1,400 and 2,200 units for those same months. Required: Use the high–low method to determine Teri’s monthly salary and commission rate per unit sold and then calculate the total number of units sold in a year when Teri’s total compensation amounted to $291,000. (Round your "Commission rate" to 2 decimal places.)

Answer 1

8,000 = fixed cost

10 unit cost

Step-by-step explanation:

High low method calcualtes the difference to get the variable cost:

2,200 units generated 30,000 (fixed + variable)

minus

1,400 units generated 22,000 (fixed + variable)

800 8,000 variable

800 units generated $8,000 of cost

$8,000 / 800 untis = 10 unit cost

Now we solve for fixed cost

total cost = fixed cost + variable cost

total cost = fixed cost + quantity x variable unit cost

30,000 = fixed + 2,200 x 10

30,000 = fixed + 22,000

30,000 - 22,000 = fixed

8,000 = fixed cost