Question

Shum Manufacturing, which uses the high-low method, makes a product called Kwan. The company incurs three different cost types (A, B, and C) and has a relevant range of operation between 2,500 units and 10,000 units per month. Per-unit costs at two different activity levels for each cost type are presented below. Type A Type B Type C Total 5,000 units $ 4 $ 9 $ 4 $ 17 7,500 units 4 6 3 13 If Shum produces 10,000 units, the total cost would be: Multiple Choice $90,000. $100,000. $110,000. $125,000. None of the answers is correct.

Answer 1

$110,000

Step-by-step explanation:

Variable cost is determined by high-low method:

Type A = $50,000

Type B = 0

Fixed cost determined using high low method is:

Type A = 0

Type B = $60,000

The total cost of high low method is $110,000.