Question

Markowis Corp. has collected the following data concerning its maintenance costs for the past 6 months. Units Produced Total Cost July 19,962 $39,924 August 35,488 53,232 September 39,924 60,995 October 24,398 42,142 November 44,360 82,620 December 42,142 68,758 Compute the variable cost per unit using the high-low method. (Round variable cost per mile to 2 decimal places e.g. 1.25.) Variable cost per unit $ Compute the fixed cost elements using the high-low method. Fixed costs $

Answer 1

Answer: variable 1.75

fixed component 4,990

Explanation: subtract the highest level of activity from the lowest one

44,360-19,962=24,398

82,620-39,924=42,696

then do 42,696 / 24,398 = 1.75

Now for fixed cost:

82,620 = 1.75 (44,360)

82,620 - 77630 = 4990

Answer 2

C = 1.75Q + 4,990

variable 1.75

fixed component 4,990

Step-by-step explanation:

High-Low method:

we subtract the highest level of activity with the lowest one:

`\left[\begin{array}{ccc}High&44,360&82,620\\Low&19,962&39,924\\Difference&24,398&42,696\\\end{array}\right]`

24,398 units generates 42,696 cost

with this information we can solve for variable cost.

42,696 / 24,398 = 1.75

Now we calcualte the fixed cost:

TC = variable x Q + fixed cost

82,620 = 1.75 (44,360) + fixed cost

82,620 - 77630 = 4990

the formula will be:

C = 1.75Q + 4,990