Question

Use the information below to answer questions 1-3. Call Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $140.50 per unit. Sales volume (units).............................................. 6,000 7,000 Cost of sales.......................................................... $497,400 $580,300 Selling, general, and administrative costs............. $273,600 $294,700 1. The best estimate of the total monthly fixed cost is:

Answer 1

Fixed Component of the selling, general adn adminsitrative cost 147,000

Step-by-step explanation:

We calculate the fixed cost using the high low method.

`\left[\begin{array}{ccc}High&7000&294700\\Low&6000&273600\\Difference&1000&21100\\\end{array}\right]`

We subtract high from low the difference is that 1,000 units generates 21,100 dollars of cost

variable cost per unit then will be:

21,100 / 1,000 = 21.1

we now calculate fixed cost:

Total cost = variable x Q + fixed cost

When Q = 6,000 total cost: 294700

294,700 = 21.1 (6,000) + Fixed Cost

Fixed Cost = 147,000